Where to invest after an asset bubble bursts? Nilesh Shah of Kotak makes the case for public markets

When an asset bubble bursts, investors may find opportunities in public markets as distressed valuations emerge, according to Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company.

Shah made the case for public markets during the third edition of Kotak Private’s 'Take and Counter Take', where he debated the post-bubble investment approach with Renuka Ramnath, Founder, MD and CEO of Multiples Alternate Asset Management.

“Post asset bubble, it makes sense to be in the public market,” Shah said.


The discussion centred on the contrasting roles of public and private markets following an asset bubble. Ramnath argued that private-market investors can exercise greater control over the companies they invest in, while Shah pointed to opportunities that can arise when public-market investors sell assets at lower prices.

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Public and private markets

Addressing investment strategy during a market crash, Ramnath asserted that private markets can provide greater control because investors can actively influence portfolio companies through board-level involvement and affirmative clauses.

“In an asset bubble crash, it could be better to be in private market because you are in control, you know what you're holding and you're not nervous,” Ramnath said.

She said private equity investors can influence how cash is used and decide which initiatives to accelerate, postpone or drop.

“When you're a public market investor, you're not sitting on the board, you're not driving the strategy of the company,” Ramnath said.

Shah, however, argued that the distinction between public and private investing is beginning to blur as active public-market managers increasingly engage with listed companies on governance and strategic decisions.

He cited a recent intervention by Kotak AMC in the acquisition strategy of a publicly traded IT company. The asset manager advised against a purely debt-funded buyout to reduce risk — a move the release said protected shareholder value and was followed by a rebound in the stock.

Shah said private-company promoters may refrain from selling their businesses at a discount during a crisis, unlike public-market investors who may liquidate their portfolios even at lower prices.

“I haven't yet met a promoter who will come and sell his company cheap. But I can show you hundreds of investors who have sold their portfolio cheap,” Shah said.

Private equity risk and crisis management

The discussion also examined the risk premium associated with private equity, including its higher fees and illiquidity.

Ramnath said generating returns in private equity can depend on how managers navigate unexpected shocks affecting portfolio companies, whether from within the company or from the broader macroeconomic environment.

“Almost in every investment, you will face a blow that you could not have planned for,” she said. “It could come internally from the company, or it could come from macroeconomic environment.”

She added that how private equity managers manage and steer their companies through periods of severe internal or external stress is an important part of generating returns.

Diversification across public and private markets

Despite their differing views on how investors should approach an asset-bubble crash, the two investors agreed that public and private markets should not necessarily be viewed as an either-or choice.

The discussion, moderated by CNBC-TV18's Nigel D'Souza, focused on portfolio construction for high-net-worth investors and the role of diversification across asset classes.

Oisharya Das, CEO of Kotak Private Banking, said the growth of private markets has expanded the opportunity set for India’s wealth creators while making portfolio-allocation decisions more nuanced.

“As India’s wealth creators navigate a broader and more evolved landscape, both public and private markets may offer investment opportunities,” Das said.

She said investors need to consider how the two markets fit into their portfolios and align with their family objectives, risk appetite and liquidity preferences.

For investors moving from a portfolio consisting entirely of public equities, Ramnath recommended increasing exposure to alternative assets gradually. Over a five- to seven-year period, she said an investor who previously had 100% of their equity allocation in public markets could allocate up to 30% of their equity portfolio to private markets.

Kotak Private’s 'Take and Counter Take' is a thought-leadership platform focused on discussions around emerging trends in the global economy, policy and markets. Each session features a 'Take' followed by a 'Counter Take', presenting a contrasting or complementary perspective.

Disclaimer: The views expressed are solely those of the speaker and should not be construed as representing the views, opinions, or positions of Kotak Mahindra Bank.

Disclosure: This article has been written by Kumar Gaurav, who is not a SEBI-registered Research Analyst or an Investment Adviser. Gaurav and their ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here