Has The Cash Call Gone Wrong? | Shyam Sekhar

Ajouté : 2026-04-29

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[00:00:47]Has the cash call gone wrong? A number of investors took a conscious decision in the first quarter of this year to stay in cash. The cash levels in people's portfolios varied anywhere between five and even 50%.

[00:01:09]When the war started between Iran and the USled forces, it looked like they had a wonderful opportunity to deploy that cash.

[00:01:26]But looking at most people who were holding cash, I think that the war did not give them enough incentive to deploy that cash adequately.

[00:01:45]Holding cash in times when valuations are moderating across the board is a big strength.

[00:01:56]It gives you the power to buy.

[00:01:59]Using that power to buy responsibly is every investor's duty to his portfolio and to himself.

[00:02:10]A professional manager holding cash similarly has that duty to his investors.

[00:02:20]But if the investor or a manager becomes too sensitive on the valuations of the macro marketwide valuations can be high. So the investor can take a view that I don't want to deploy.

[00:02:41]And he looks at the economic macros which is oil price going up from 60 to 120 is not good for the economy.

[00:02:49]Inflation will rise. We may need to hike interest rates. We may need to restrict the liquidity in the system. That will have a ripple effect across industries.

[00:03:00]This can moderate asset prices across the board.

[00:03:06]What I just gave you is a macro view and this could stop an investor holding cash from deploying money in the markets.

[00:03:15]But at the same time, there are other investors who are looking bottom up at specific investment opportunities.

[00:03:21]Looking at companies which have fallen significantly in this correction which are likely to do better in the coming quarters. Look at the granular performance of businesses and how the market is mispricing them and then make a few incremental investments in these opportunities.

[00:03:39]It's not as if you're going to buy an outsized position in a company. You could take up your position in a company using the correction in prices and using the valuations which are coming in your favor.

[00:03:55]The market is throwing it a stock at you which you always wanted to buy but didn't like to buy because the valuation was high. This is what happened in March. The question is did you use it or let me ask another question. Should you have used it?

[00:04:12]I personally think that one should have an open mind. One should not be rigid.

[00:04:19]Flexibility is definitely an essential in an investor's mental construct. Your mindset should allow it. If you allow it, then you see opportunities better and often you see the best opportunities more clearly.

[00:04:40]Personally in every crisis I like to see opportunity but I like to see opportunity very responsibly.

[00:04:49]I don't like to go and just dump money into the portfolio and buy all the stocks in the same proportion.

[00:04:56]That's not what I like to do. But I like to specifically buy a stock which is very very attractively valued and scale it up in the portfolio so that when the market recovers when the economy recovers and when the stock is seen differently by the market that incremental investment makes a big difference to the portfolio. That is essentially what I like to do and that is mostly what I have done in every crisis like the crisis in March.

[00:05:32]So manager holding cash on the 1st of March had the opportunity through March right up to the last day of March to invest that money wherever he found opportunity to be attractive.

[00:05:49]Now think about this.

[00:05:51]Did we find enough opportunities to deploy in March or was the market expensive even on the 31st of March or the last trading day of March? You will agree with me that the entire market was not expensive on the last day. There were ample opportunities as March progressed.

[00:06:12]So the opportunity to deploy cash in March was very reasonable and a lot of people did invest their capital, their liquidity and brought their cash levels down.

[00:06:30]Now opportunities like March will keep coming. I'm sure they'll keep coming.

[00:06:37]But every opportunity is before every investor and every manager to take advantage of and entirely up to them to do whatever is right for their portfolio.

[00:06:56]In my opinion, if somebody did not deploy the cash adequately in March, that may be a bit of a problem in the near term because I doubt if we will get as good an opportunity often. It's not going to be a regular feature.

[00:07:17]We may get another opportunity of a lesser extent.

[00:07:23]You won't get stocks as cheap as you got in March. That's my sense. If you still get stocks cheap in another time horizon, let's say 3 months later, you get stocks even cheaper than March, then you're very very lucky. But should you have wasted the March opportunity is the question. I would definitely like to participate in every opportunity and use every opportunity to make the portfolio stronger. That is my nature as an investor. And I like my investors also to understand that cash is an instrument that gives you the power to improve your investing when the markets fall. That's the purpose of cash. Otherwise, we can be fully deployed. Correct.

[00:08:17]So when your cash levels are high and the market falls sharply, you can reduce your cash levels according to your purchasing pattern, according to your conviction to buy in specific stocks. You can't say that okay, I have 50 now I'm going to come down to 10. So let me find where I can put this five. That's not what I'm saying. You look at the stock. You look at how much you can buy in the stock. be bottom up and you scale up your stock position accordingly and your cash positions will support that. If you have not deployed any cash in March, then the pressure will rise on you when the markets go up in April. And that's precisely what is happening now.

[00:09:01]And generally, what do investors do when they're holding very high cash and the market goes up continuously and the pressure keeps building on them to deploy capital? investors will question why didn't you use the opportunity in March. This is very normal. When this happens, it's important for a manager to hold on to his conviction and not deploy capital at a higher level. Often this tragic consequence results because a lot of people deploy capital after the market goes up and that is not good for the long-term returns of the portfolio. Not deploying when the market falls and deploying after the market goes up is generally not uh the right way to do it or surely there is a better way to do it.

[00:09:51]I would think that uh in March the cash was something that could have been put to good use. That's my sense of this crisis.

[00:10:03]And I did not just put the cash to good use. I also encouraged our investors to bring in more cash because whether the cash is held inside the portfolio or in their bank account, it's cash.

[00:10:18]The liquidity with the investor is his power to make his portfolio stronger. So I saw the cash levels both inside the portfolio and with the investor and gently had these conversations with them through my colleagues to ensure that they deploy some part of the cash.

[00:10:43]So when the financial year ended the portfolios might have been at lows but the cash levels had come down in March and money had gone into very very specific investments. I'm sure a number of investment managers would have done it. If they had done it correctly then the rally in April will help the portfolio of the investor to bounce back better.

[00:11:12]And this would apply to individual portfolios in a PMS as well as to mutual fund portfolios.

[00:11:20]Now this is a market where you need to be very opportunity centric and opportunity specific and you need to be disciplined in what you pay. Your valuation zone of comfort has to be very sharp.

[00:11:45]You must avoid overpaying. But this is a market where you should deploy cash responsibly and not carry excess cash. So the level of cash you carry in a portfolio should be moderated constantly as you find opportunities.

[00:12:03]My sense is that holding cash is a manager's choice. Deploying cash is also a manager's choice.

[00:12:13]If you are the manager, please look at your portfolio. Look at the stocks in your portfolio which need scaling up and deploy that cash responsibly. If you have given money to a manager, please ensure that the managers have deployed some money or reasonable money and make a call whether the manager is showing enough conviction to deploy and decide for yourself how much money you should allocate to a manager with higher conviction to deploy in a falling market.

[00:12:50]It's important that you give money to somebody who acts on the money. If somebody doesn't act on the money and you're continuously giving them money, then you should know when they will deploy the money. It's fair. That is how we can do justice to the money that is invested.

[00:13:05]I think it's a very very fine line. You can't take sharp and aggressive judgments on this.

[00:13:15]Your investment judgments should be very refined.

[00:13:20]If you are giving money to managers then you should understand their investment judgments and then decide what your investment stance should be with respect to their portfolios. Once your cash has been deployed, you need to try to build more cash in your personal accounts in your bank, which will again give you the power to do more when the markets correct the next time because corrections like what we saw in March are episodic. You may get them once a year or twice a year. It's important that you should take advantage of every episodic correction. Use the cash that you're holding inside your portfolio or in your bank account to scale up your equities responsibly and to ensure that your portfolios are better positioned to generate superior long-term compounding.

[00:14:17]Cash is king only if the king works.

[00:14:22]Cash is not a king if he's going to sit on the sidelines and not lead from the front. Thank you for watching this