MindSphere

Reflections on the Indian Mid-Cap Market — Dancing While the Music Plays

“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria — but it’s during euphoria that fortunes are made, if you get the timing right.”

Where We Are: Riding Stage 2, Eyes on Stage 3

The Indian mid-cap market is in the midst of a textbook bull run. Retail flows are strong. Institutions are no longer on the sidelines. Narratives about India’s decade are finding traction not only on D-Street but also in drawing rooms and WhatsApp groups.

I believe we’re nearing the mid-to-late phase of Stage 2 — the point where fundamentals have been recognized and optimism begins to dominate. Importantly, this is not a time to be skeptical. This is a time to lean in.

The High-Beta Opportunity

Mid-caps are volatility incarnate. And that’s a feature, not a bug. In a rising market, they move faster, harder and higher. When operating leverage kicks in amid credit easing and demand tailwinds, earnings compound — and so does sentiment.

Yes, valuations are high. But in bull markets, valuation is often a lagging indicator. In these moments, price leads narrative and the biggest mistake is sitting out waiting for sanity.

Credit Cycle Tailwind: The Hidden Force

We’re in the early innings of a credit easing regime. Rates are stable, transmission is improving and risk appetite is expanding. This is exactly the environment where mid-cap firms with high fixed costs and cyclical revenue see explosive margin expansion. I’m actively hunting for such setups.

The playbook? Find businesses where every ₹1 of extra revenue flows down as ₹0.80 in profit.

On Euphoria: Don’t Flee — Position

Howard Marks warns about Stage 3 — when “everyone believes things will get better forever.” He’s right.

But here’s the twist: Stage 3 is where wealth gets minted — not through prudence, but through strategic boldness.

While the final inning is often filled with risk, it is also when capital chases momentum and multiples decouple from reality. I intend to be a disciplined surfer riding this wave — not the guy on the beach calling it frothy.

Final Thought: Play the Game, Know the Clock

I do not advocate blind participation. But I do believe that exiting too early is often just as dangerous as staying too late. The clock may be ticking toward exuberance — but the best gains often occur in this very phase.

There will be a time for caution. For now, I choose velocity.