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The Weekly Wrap | The Battles That Count

Aron Almeida
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Exactly ninety years ago, on May 25, 1935, to be precise, a 21-year-old student of the Ohio State University took part in an athletics championship held at the University of Michigan in the town of Ann Arbor. Over a 45-minute period starting around 3:15 p.m., the youngster smashed three world records and matched another as he went on to win the 100-yard sprint, long jump, the 220-yard sprint and the 220-yard hurdles.

By the next day, the athlete had become a household name across America. Fifteen months later, at the 1936 Olympics in Berlin, James Cleveland Owens—better known as Jesse Owens—would go on to etch his name in history books yet again as he went for gold in the 100- and 200-metre sprints, the long jump and the 4×100-metre relay. In the process, he helped to shatter Adolf Hitler and the Nazi party’s propaganda of German superiority.

Why are we talking about Owens forty-five years after he passed away? Well, it’s to remind ourselves that not all battles are fought—or need to be fought—on the battlefield and that at least some battles can be—and are indeed—fought elsewhere. Like in our TV newsrooms, for instance, if you know what we mean.

We won’t go into the details of those battles, of course, since that’s beyond the mandate of this newsletter. What we can do, however, is look at how those battles affect us as investors in stocks and mutual funds.

On April 22, terrorists killed 26 people in Pahalgam. This prompted India to launch military attacks into Pakistan under Operation Sindoor on May 9. This has boosted the stocks of defence companies and defence-focused MF schemes.

The Nifty India Defence index has jumped almost 25% over this period. Garden Reach Shipbuilders and Paras Defence have been the standout performers, surging 58% and 53%, respectively. IdeaForge has shot up 46%; Data Patterns has soared 40%; Bharat Dynamics has climbed 35%; Bharat Electronics, Cochin Shipyard and Mazagon Dock have risen nearly 27-28% each; and Hindustan Aeronautics is up 17%. Similarly, the Motilal Oswal Nifty India Defence Index Fund has returned 24% while the HDFC Defence Fund has risen 16% over one month.

However, unless you are an active stock trader by profession or hobby, these short-term movements don’t matter much in the medium to long term. Consider the HDFC scheme, for instance. Over a one-year period, it has returned barely 14%. That’s still above the BSE 500 Total Return Index’s 8% gain, but nowhere near the level that should give you FOMO.

Let’s take individual stocks, now. Garden Reach’s share price jumped 255% between April 1 and July 5, 2024, to Rs 2,834.60. By the end of February this year, it had lost more than half its value, falling below Rs 1,200.00. Then, it began rising again. On Friday, May 23, it crossed the Rs 2,850 level. Basically, it is now back at year-ago levels. Several other defence stocks would have followed a similar trajectory.

So, if you were watching the share price of Garden Reach, or any other defence stock, on a daily basis, and you bought when it was at the bottom and sold when it was at its peak, you would have made big bucks. And if you have any other full-time job and can’t or don’t track individual stocks every day, you probably didn’t make those big bucks. 

But you don’t have to regret missing these chances and focus instead on more important battles. Think, or rethink, your asset allocation and risk appetite, and your financial and non-financial goals. You don’t have to latch on to every new fad. You can set aside some money for tactical bets but keep the bulk of your capital and energy for longer-term targets.

After all, as Jesse Owens once said: “The battles that count aren’t the ones for gold medals. The struggles within yourself—the invisible, inevitable battles inside all of us—that’s where it’s at.”

 

 

 

Ready to Race

 

Talking about battles, India’s biggest motorcycle by market value is taking up perhaps its biggest challenge in years.

Bajaj Auto, the maker of Pulsar bikes and Chetak electric scooters, has decided to dive headfirst into the battle for the survival of Austrian sports bike maker KTM.

The company said this week it will take a majority stake in KTM as part of an 800-million-euro debt package. Bajaj Auto first picked up a 14.5% stake in KTM in 2007 and increased it to around 37.5% over the years. 

KTM has been reeling under liquidity shortages for the past many months and even filed for court restructuring proceedings in November. Bajaj Auto said it has infused 200 million euros into KTM in recent months and will spend 600 million euros more to settle claims of KTM’s creditors and to restart its business.

Will KTM’s problems divert Bajaj Auto’s attention away from its own issues at home? Well, we hope not. But the concerns are valid.

The company has been losing market share in India’s bike market for the past few years. Its domestic market share for 2024-25 slipped to 11.41% from 12.03% the year before, keeping it at the No.4 spot after Hero MotoCorp, Honda Motorcycle, and TVS Motor, according to data from the Federation of Automobile Dealers Associations (FADA). In fact, Bajaj and Hero were the only companies that lost significant market share in FY25.

Thankfully, Bajaj’s exports and higher-value products compared with Hero and TVS have helped it maintain its lead in revenue and profits. TVS Motor posted revenue of Rs 36,251 crore and profit of Rs 2,711 crore for FY25 while Hero MotoCorp recorded revenue of Rs 40,756 crore and profit of Rs 4,610 crore. Bajaj has yet to declare full-year results but its revenue for the nine months ended Dec. 31, 2024, touched Rs 38,348 crore while profit was Rs 5,523 crore. 

This gap reflects in the stock market performance, too. Bajaj Auto commands a market value of Rs 2,45,392 crore, nearly three times that of Hero and more than the combined value of Hero and TVS. 

Can Bajaj continue to command a premium compared to its rivals? That’ll depend on a lot on the new battle on its hand.

 

The Feeling is Mutual

 

Moving on from stocks to mutual funds, the Association of Mutual Funds in India (AMFI) this week released its annual report for 2024-25 highlighting the state of the MF industry and pointing out several interesting trends.

For one, the industry’s assets under management (AUM) jumped 23.11% to a record Rs 65.74 trillion at the end of March 2025. The AUM—for those new to the MF industry—reflects the market value of the total assets. So, the AUM rises either when people invest more or the market value of existing assets rises or both conditions are met, and vice versa. 

In FY25, both conditions were met, though there is more to it than meets the eye. The AMFI report showed that net inflows of Rs 8.15 trillion accounted for two-thirds of the Rs 12.34 trillion increase in the AUM. Mark-to-market gains provided a smaller boost as the Nifty 50 Total Return Index rose just 6.0%.

Equity MFs recorded inflows of Rs 4.17 trillion, the highest ever in a financial year and half of total inflows. This pushed the AUM of equity schemes by a fourth to Rs 29.45 trillion. The AUM of debt MFs jumped 20.5% to Rs 15.21 trillion while the AUM of hybrid funds increased 22.24% to Rs 8.83 trillion.

The amount of money flowing through SIPs soared 45.24% in FY25 to Rs 2.89 trillion. This jump, along with MTM gains, saw SIP assets rise by a fourth to Rs 13.35 trillion, thereby accounting for a fifth of the MF industry’s total AUM. New SIP accounts registered during the year rose to 6.80 crore from 4.28 crore in FY24.

Not surprisingly, the proportion of direct plans in total SIP AUM has increased to 21% as of March 2025 from 12% as of March 2020. The report also noted that more and more investors are adopting long-term wealth creation strategies. This is evident from the increase in the ratio of SIP assets held for more than five years to 19% as of March 2025 from 4% as of March 2020 in the case of direct plans and to 33% from 12% for regular plans.

Notwithstanding the strong growth, the industry still had a total of 5.34 crore unique investors as of March 2025. That’s a tiny portion of India’s population. Clearly, India has a long way to go.

 

Big Beautiful Bill

 

In some international news that also affected Indian and other global markets, the yields on US bonds jumped this week as investors dumped government bonds after Moody’s downgraded the country’s credit rating by a notch from the perfect rating and as the House of Representatives passed President Donald Trump’s “big beautiful bill”.

Yields on 30-year US bonds touched their highest level in 19 months on Thursday, as worries mounted over the US government fiscal deficit. The yield on the 30-year bond hit a 19-month high of 5.16% on Thursday before retreating slightly. The yield on 10-year benchmark touched 4.63%, the highest since February 12. Bond yields and prices move inversely.

The sharp rise in US bond yields, coupled with a recent fall in domestic government bond yields, has reduced the spread between the 10-year bonds to 165 basis points, the lowest in over 20 years. This has made Indian bonds less attractive for foreign investors.

Moody’s, the last of the big rating agencies to have a top rating for the US, downgraded its long-term issuer rating to ‘Aa1’ from ‘Aaa’ last Friday. The downgrade reflects the increase in government debt and interest payment ratios over a decade, Moody’s said.

The bill, officially known as the “One Big-Beautiful Bill Act”, was passed by the House of Representatives by a razor-thin majority of 215 votes to 214. The bill will now go to the Senate for approval.

Moody’s said Trump’s bill, if passed, would add approximately $4 trillion to the federal fiscal primary deficit, excluding interest payments, over the next decade.

 

 

 

Market Wrap

 

The Nifty 50 and the Sensex took a breather this week after a 4% rally last week. The two benchmark indices ended the week down about 0.7% each. The midcap index also fell by a similar quantum but the small-cap index inched up 0.5%.

Market breadth was negative with 35 of the 50 Nifty stocks and 21 of the 30 Sensex companies ending in the red.

Bharat Electronics was the biggest gainer, ahead of its entry into the Sensex. It rose 5.5%, clocking its seventh weekly gain on optimism towards defence stocks.

HDFC Life Insurance and Tata Steel were also among the top performers as was Bajaj Auto, shrugging off concerns related to its big bet on KTM. IndusInd Bank eked out gains as investors felt the worst was behind the lender. 

Jio Financial, SBI Life and Bharti Airtel were among the other gainers.

On the other end of the spectrum, Grasim was the top loser. It was followed by Automakers Maruti and Mahindra & Mahindra, and Zomato parent Eternal Ltd. All five IT companies in the Nifty ended in the red, with Wipro falling the most.

Consumer-oriented stocks such as Trent and Tata Consumer as well as heavyweight Reliance each slipped more than 2% each.

 

Earnings snapshot

 

Other Headlines

 

That’s all for this week. Until next week, happy investing.

 

Interested in how we think about the markets?

Read more: Zen And The Art Of Investing

 

Watch here: Investing in International Markets

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