Portfolio as of November 1st
| Stocks & Commodities |
Value |
| Gold |
11.0% |
| Narayana Hrudayala |
4.4% |
| Samhi Hotels |
13.8% |
| TD Power |
15.0% |
| JM Financial |
6.6% |
| Aditya Birla Capital |
5.5% |
| Time Technoplast |
4.9% |
| Silver |
13.5% |
| Goodluck India |
5.0% |
| Oswal Pumps |
4.2% |
| Max Estates |
3.9% |
| Parag Milk |
5.7% |
| Alpex Solar |
4.0% |
| Cash |
2.4% |
Changes made in October:
- Exited Fineotex Chemical
- Increased allocation in Parag Milk slightly
- Bought Alpex Solar
Purchase Thesis
Key Learning
In October, I had suggested that markets were in the panic or capitulation stage of the Market Psychology Cycle. I was slightly early. In hindsight, we were closer to despondency, the final exhaustion phase before recovery. The rebound since then makes that clear. One factor I underweighted was the growing likelihood of a Fed pivot. With the Fed now signaling an end to tightening by December, risk assets have more room to climb.
Macro Note
Next is an article I wrote titled The Architecture of Fragility. It’s long, but it helps frame the context in which all our portfolio decisions sit. Highly recommend giving it a full read.
The Silent Repricing of Money
The shift beneath the surface
Since 2022, much of the conversation around de-dollarization has focused on visible signs such as trade settlements, SWIFT transactions, or oil contracts. Yet the real change lies deeper, in balance sheets and reserve composition. What central banks and households choose to hold quietly reflects where trust resides. On that metric, the shift is already clear. The East has been accumulating gold steadily for two decades, and now its households are following suit.
Gold as the BRICS stablecoin
Ritesh Jain’s framing captures the transition well. For the Western system, the stablecoin is emerging as a permissioned settlement asset that functions within its own regulatory perimeter. For the BRICS bloc, gold already serves that role: an apolitical form of collateral and settlement outside Western banking infrastructure.
Three facts underline this evolution:
- Around 70% of the world’s gold reserves are now held by BRICS countries or have migrated from Western to Eastern balance sheets over the past 20 years.
- The two most significant marginal producers are Russia and China.
- The West is reluctant to endorse gold’s return as a reserve asset precisely because most of it is now concentrated outside its control.
The resistance to gold is therefore not economic but geopolitical. Should the dollar’s reserve share decline, Western policymakers would prefer that global savings flow into a US-regulated digital-dollar or stablecoin framework rather than into a metal held by their strategic competitors. The outcome is the emergence of two overlapping financial systems: one based on jurisdictional control, the other on neutral collateral.
Households join the state
The chart attached below, showing the sharp rise in Chinese household demand for gold ETFs, demonstrates how this transition has broadened. ETF flows surged to multi-billion-dollar levels, revealing that Chinese households have started allocating savings to gold in the same direction as their central bank.
This pattern appeared soon after the freezing of Russia’s foreign reserves in 2022, ramping it up even though they started buying in 2014. Once that event occurred, China moved to diversify its reserves and trade exposures. Households appear to be mirroring the same logic. This is not yield-seeking behavior but an instinctive response to sanction risk and an effort to protect purchasing power. When both the state and the citizen hedge through the same neutral asset, it signals a deep shift in confidence.
Why the West cannot follow easily
The United States still holds about 8,100 (allegedly?) tonnes of gold, valued on the Treasury’s books at $42 per ounce. A simple revaluation to market prices could expand its balance sheet substantially. However, the problem is now geopolitical rather than financial. The ownership of marginal gold has shifted eastward. Any return to a gold-linked framework would implicitly validate that shift and reward the BRICS bloc.
Historical parallels
Arnaud Bertrand provides a useful historical reference. When gold has more than doubled in the reserve currency of the day, it has almost always coincided with a profound loss of confidence in the monetary and political order. Such moments accompanied the fall of Rome, the decline of Spain, the French Revolution, and the end of Bretton Woods. In each case, the repricing of gold reflected a transfer of real wealth from currency users to asset holders, widening inequality and triggering political change.
Real versus nominal prosperity
Mike Maloney illustrates the same theme through silver. Adjusted for 1980 dollars, silver today trades near $12 an ounce, implying it would need to quadruple to match its previous real peak. The Roman denarius took roughly two and a half centuries to lose its value. Modern fiat systems have achieved similar debasement in less than half that time, not by melting coins but by expanding digital claims at will. When creation of money becomes effortless, trust and collateral become the true constraints. That is why gold is being re-rated across balance sheets.
Central banks have already voted
Steve Hanke observes that global central banks now hold more gold than at any point in the last decade. This shift reflects both precaution and policy. The dollar has been increasingly used as a geopolitical instrument through sanctions and asset freezes, while the US fiscal position has weakened. Federal debt now approaches $38 trillion and total system debt nearly $100 trillion, or over 300% of GDP. Add to it the NPV of another $100 trillion of unfunded debt. Gurmeet Chadha’s framework of reserve-currency cycles (rise, peak, over-extension, and decline) suggests that the United States has entered the phase where fiscal and military overreach erode confidence.
The logic of diversification
For many reserve managers, the calculus is simple. Assets held in another country’s legal jurisdiction can be frozen; neutral assets cannot. The next evolution of reserve management therefore tilts toward collateral that can be stored, tokenized, and settled without Western intermediaries.
A bifurcated system
The most plausible outcome is not the collapse of the dollar but the coexistence of two systems. One will be a gated dollar environment managed through stablecoin regulations and compliance networks. The other will be a portable gold and commodity network, facilitated by tokenization and clearing centres in the East. Because credible collateral is finite while the volume of dollar claims keeps expanding, the relative price of that collateral must rise to restore balance.
A widening gap between East and West
Luke Gromen’s observation that Western investors would need to buy gold daily for several years merely to match Eastern holdings underlines how early this process remains. The reallocation has only begun. When Western institutions finally acknowledge gold as a parallel reserve asset rather than a speculative instrument, the pace of repricing could accelerate sharply.
AI and the Debt-Based System
A productivity boom with a paradox
Artificial intelligence is often presented as the new industrial revolution, a transformative force capable of lifting productivity, reshaping labour markets, and driving growth. What receives less attention is how such a transformation fits within a monetary system that is built on debt and employment. The more that machines replace labour, the less income circulates through the traditional credit and consumption channels on which the system depends. In a consumption-driven economy like the United States, the scale of investment in AI has become so large that without it, second-quarter GDP growth would likely have been negative, a reminder that the boom now sustains the very growth it was meant to enhance.
The second-derivative problem
The apparent paradox is what Luke Gromen calls the second-derivative problem: productivity may rise, but the system built on debt and wages cannot survive a decline in income velocity. As automation spreads, employment and wage growth decelerate while credit obligations remain fixed. The very efficiency that boosts margins undermines the cash flow that services the debt.
The chain reaction
The logic is straightforward. As automation spreads, employment falls and wage growth turns negative. With fewer paychecks, mortgage and loan repayments decline, leading to credit losses for banks. Those banks hold a large proportion of their reserves in US Treasuries. To offset losses, they sell Treasuries into the market, pushing yields higher just as unemployment rises. The outcome is an emerging-market-style crisis within the issuer of the global reserve currency: unemployment, wage deflation, and rising interest rates occurring simultaneously.
Such a cycle would normally be broken by policy intervention. Yet the scale of leverage in the modern financial system makes traditional solutions difficult. If rates fall to cushion unemployment, inflation risk rises; if they remain high to protect the currency and bonds, asset markets and credit creation weaken. Either path leads to further dependence on central banks to stabilize both the fiscal and the financial system.
From private UBI to public UBI
This pattern is not entirely new. During the early 2000s, as manufacturing jobs were offshored to China, household living standards in the United States were maintained through what Gromen calls private universal basic income . Credit standards collapsed, allowing households to borrow against inflated home values to preserve consumption even as wages stagnated. When the housing bubble burst, the losses moved onto the Federal Reserve’s balance sheet.
The current transition appears to be the next iteration of that cycle. Artificial intelligence may create another gap between productivity and employment, only this time there is no new industrial sector left to absorb displaced workers. The likely policy response would be public universal basic income, funded not by private credit expansion but by government transfers and monetary creation.
The fiscal constraint
Public UBI raises an immediate question: who finances it? With total US debt approaching $100 trillion across households, corporations, and government, the fiscal capacity for large-scale redistribution is limited. The Federal Reserve can monetize deficits for a period, but doing so permanently would erode the credibility of Treasury securities as the world’s primary reserve asset.
In that sense, AI’s economic impact may accelerate the fiscal and monetary convergence that was already underway. The need to maintain social stability would require further money creation, while the requirement to protect bond market confidence would argue for restraint. Bridging this contradiction will likely involve new financial architecture (digital currencies, tokenized Treasuries, and programmable transfers) but the underlying pressure will remain.
The employment mismatch
Artificial intelligence’s reach extends well beyond software. Entire categories of white-collar employment are exposed. In healthcare, administration and billing constitute the largest share of jobs across most states, and these are precisely the roles that AI can perform faster, cheaper, and with fewer errors. In professional services, entry-level and mid-tier programming, documentation, and support functions face similar risk. If the largest employers in the country become vulnerable to automation, the implications for credit demand, housing, and consumption are profound.
The historical rhyme
The last time such a displacement occurred was when industrial jobs were lost to globalization. Between 2001 and 2005, the US workforce experienced an economic shock as manufacturing moved offshore. Policy responded by relaxing credit, creating a temporary illusion of stability. When that illusion ended, the debt moved to the public balance sheet. The current cycle follows the same structure but with no external geography left to absorb displaced labour.
Policy inevitability
Eventually, the burden of sustaining incomes in an economy with shrinking wage share falls to the state. The sequence is visible already: growing fiscal transfers, rising deficits, and renewed discussions of income support. These are fiscal responses to a technological displacement problem. From a monetary perspective, they represent the next phase of the long transition from private to public balance-sheet expansion.
Market consequences
If this interpretation is correct, the financial system faces a structural choice. Either artificial intelligence’s productivity gains are slower and less disruptive than expected, allowing the current debt-based model to survive longer, or the transition happens quickly and forces a reconfiguration of policy, taxation, and money itself. In either case, assets that sit outside the credit system, such as gold and bitcoin, gain relative credibility. They are not claims on future income but stores of value in a world where income generation itself is being mechanized.
An uncomfortable symmetry
The irony is that the technology designed to make production infinitely efficient may simultaneously make the monetary system that funds production increasingly unstable. The more perfect the efficiency, the fewer the paychecks; the fewer the paychecks, the greater the reliance on credit and fiscal transfers; the greater the transfers, the weaker the currency. The logic loops back on itself.
Artificial intelligence therefore represents more than a technological shift. It is an accelerant for an already fragile monetary order, forcing a collision between exponential productivity and linear debt obligations. The outcome is not yet visible, but the direction of tension is clear: a world where growth depends on policy-created income and where collateral, not credit, becomes the true measure of safety.
Fragile Fiscal Math in the United States
The dependence on asset prices
The United States’ fiscal position is now so stretched that market stability has effectively become a policy objective. Between 15-20% of federal tax revenues are derived from capital gains, compared with 2-3% in countries like India. Any prolonged correction in equities or housing would therefore reduce fiscal receipts and widen an already large deficit. Rising markets are no longer a sign of prosperity alone; they have become essential to fiscal viability.
The constraint of high valuations
Steve Hanke’s observation that the ratio of US market capitalization to money supply is approaching dot-com levels highlights the fragility of this arrangement. With valuations already stretched and liquidity ratios deteriorating, any monetary tightening aimed at restoring balance risks impairing tax revenues and financial stability simultaneously.
Fiscal and monetary authorities thus face a narrow path. They must sustain growth and asset prices to preserve revenues, yet must also manage inflation and currency credibility.
India: Reflating a High-PE Market
This entire section is credited to Ridham Desai
A divergence from the global rally
Until early 2024, India’s equity markets moved almost in lockstep with the S&P 500, maintaining a correlation above 90%. That link has now broken. While global indices have advanced on the back of artificial intelligence optimism and liquidity expansion, Indian equities have lagged. The reason lies in the arithmetic of nominal growth and valuation.
The problem of low nominal GDP
In India, corporate profitability and equity valuations depend on both volume growth and price growth. Together they form nominal GDP. For over two decades, India’s nominal growth averaged around 12%, a level that allowed the market to sustain higher valuation multiples. In the current cycle, nominal GDP growth has fallen to about 8%.
At this pace, the earnings power of the economy cannot justify the same price-to-earnings ratios as before. The market’s structural premium, long anchored by expectations of double-digit nominal growth, becomes harder to defend. Without inflation providing the price component, and with volume growth moderating, valuations begin to rest on a thinner base.
Policy responds through reflation
The authorities have recognized this imbalance. Coming out of the pandemic, India’s policymakers ran tighter monetary and fiscal settings than most emerging markets. The Reserve Bank of India and the government feared post-COVID inflation and acted pre-emptively, tightening liquidity and keeping real rates positive. The result was one of the world’s most controlled inflation outcomes, but it came at the cost of slowing nominal growth.
By mid-2024, as election-related spending subsided and a poor monsoon reduced rural demand, growth softened further. Fiscal deficit fell from 6% to about 3.5% of GDP, real rates rose, and credit conditions tightened. The policy pivot began in February 2025. The central bank cut the repo rate and the cash reserve ratio, infused liquidity through open market operations, and encouraged banks to lend more freely. In capital-market terms, this is a deliberate reflation trade .
India is now attempting to raise inflation instead of suppressing it. For nearly a decade, policy was disinflationary; the next phase aims to restore nominal momentum. If successful, the next twelve months could see stronger corporate earnings, higher credit growth, and a recovery in nominal GDP toward its long-term average.
Sensex in gold terms
When measured in gold, the Indian equity market tells a different story. The Sensex’s value in ounces of gold has fallen sharply, now hovering near levels last seen during major crisis episodes such as the 2000 tech bust, the 2008 global financial crisis, and the 2020 pandemic. The difference today is that there is no visible crisis. Measured against the world’s oldest yardstick of purchasing power, Indian equities are trading at historically low real valuations.
This divergence illustrates the theme from earlier sections: nominal prosperity can mask real stagnation. In rupees, the market appears expensive; in gold, it looks depressed. The coexistence of these two realities shows how asset inflation and currency depreciation can offset each other, leaving real wealth unchanged.
Why foreign investors remain cautious
Foreign institutional investors have been slow to return. Several reasons explain their restraint:
- Absolute valuation discomfort : Although relative valuations have improved (India now trades near 20 times earnings versus China’s similar multiple) absolute levels remain high by emerging-market standards.
- Absence of an AI trade : The global rally has been driven by artificial intelligence and technology themes. India lacks a direct AI analogue, and its listed universe offers few ways to participate in that narrative.
- Strong domestic ownership : A powerful domestic bid continues to support equities. Foreign investors competing with local mutual funds and retail flows must drive prices materially higher to attract supply, reducing potential returns.
- Passive outflows : India’s weight in global and emerging-market indices surged through 2023 but has since receded as China outperformed. Index rebalancing has mechanically triggered selling, compounding net foreign outflows.
These factors have combined to create one of the longest periods of foreign selling in recent years, despite India’s strong macro fundamentals.
Reflation as the bridge
Ridham Desai’s framework provides a useful lens. The current policy shift is designed to reflate the system, to push inflation and nominal GDP higher so that valuations and earnings can reconnect. Early indicators suggest that the effort is gaining traction. Lending growth is improving, rural demand is recovering, and government capital expenditure remains elevated. If inflation settles near 4-5% and real growth remains around 6%, nominal growth could return to the 12% zone that historically supports market multiples.
The immediate risk is overshooting. If liquidity injections lift asset prices faster than earnings, valuation pressure will reappear before fundamentals catch up. Conversely, if the reflation fails to ignite demand, corporate earnings will continue to lag and the market may drift sideways despite abundant liquidity.
The illusion of stability
While valuations remain high and earnings visibility uncertain, the volatility index tells a different story. The India VIX has fallen to one of its lowest readings on record. The market is pricing tranquillity at precisely the point where macro conditions are being rewritten. Currency weakness, uneven monsoon patterns, fragile external demand, and global policy divergence are all present, yet implied volatility is lower than during periods of sustained calm.
Such compression often precedes expansion. Periods of artificially low volatility signal not the absence of risk but the abundance of liquidity. When the liquidity cycle turns or policy priorities shift, volatility tends to reprice suddenly.
Reading the divergence correctly
The apparent contradiction between low volatility and weak participation captures the market’s uncertainty. Domestically, investors see reflation as a policy tailwind; globally, allocators perceive stretched valuations and limited new narratives. The result is a stand-off: steady prices, low volatility, and little conviction.
For patient investors, this environment offers opportunity. Businesses positioned to benefit from reflation (those exposed to credit, housing, consumption, and infrastructure) may experience meaningful earnings growth if nominal momentum returns. Equally, the market’s discount in gold terms implies that India’s real assets remain relatively inexpensive for those measuring wealth in alternative units of account.
A market waiting for confirmation
India’s next leg of performance depends on two confirmations: the success of policy-induced reflation and a revival in earnings momentum. If these materialize, the market can justify its valuations and rejoin the global rally. If not, India will remain an expensive market in nominal terms and a stagnant one in real terms.
The paradox is that both readings are true. Nominal prosperity and real cheapness coexist, just as they did in earlier cycles when the denominator (money itself) was shifting beneath the surface.
Way forward
Position, not predict
Forecasting turning points in monetary regimes is rarely possible. Positioning, however, can be deliberate. The world that is emerging favors assets that do not depend on perfect financial intermediation to hold their value. Collateral will matter more than credit, self-financing capacity more than leverage, and tangible utility more than narrative.
Build portfolios around collateral strength
Within that framework, gold and silver remain the clearest expressions of balance-sheet caution. They represent the reassertion of collateral over promise. Bitcoin, though more volatile, functions as an additional ledger of scarcity. Equities backed by real cash flow and low external financing needs fit the same logic.
India’s opportunity and test
For India, the path ahead is one of policy credibility. Reflation can succeed if it restores nominal growth without eroding fiscal discipline. Domestic liquidity is ample, demographics are supportive, and the credit cycle is favorable. What the market now requires is confirmation that earnings can translate nominal recovery into sustainable profit growth.
I would like to credit most of this work to my teachers Ritesh Jain, Luke Gromen, Steve Hanke, Ridham Desai, Mike Maloney, Arnaud Bertrand, Ishmohit Arora, and Gurmeet Chadha. I wrote this piece simply as a means of consolidating all their knowledge to paint a digestible picture for you all.
