Stock-Specific Investing Is Key To Wealth Creation, Says Vijay Kedia, Owner Of Kedia Securities

Stock market indices such as the Nifty 50 and Sensex do not give a true picture of the economy, the market or the stock market, said Vijay Kedia, Individual Investor and Owner, Kedia Securities, at The Money Question in Mumbai today, September 23.

“Index does not give a true picture of the economy, of the market, of the stock market. Neither does it represent the mood of retail investors,” Kedia said.

Same Market, Different Stock Returns

He cited data showing that the Nifty 50 delivered around 7.1 per cent annualised returns between September 2021 and August 2026. However, 13 of its 50 stocks, representing around 33.7 per cent of the index weight, collectively delivered a negative return of 0.8 per cent during the period. Kedia also referred to data covering 2,867 stocks over three years, which showed that more than 40 per cent had lost money, while around 21 per cent had doubled or more. “Same country, same economy, same stock market, but different results,” he said.

He said the same divergence was visible in his own portfolio, where some stocks remained flat or fell 10-20 per cent while others delivered very large gains. He cited one investment that rose around 40 times after Covid and Neuland Laboratories, which he said he bought at around Rs 250 and which had risen to around Rs 22,000. “Even one stock gives you this kind of return, then the scenario of the entire bouquet will change dramatically,” he said.

Kedia said this is why investors need to focus on individual companies rather than simply following the index, ETFs or herd behaviour. “You can only make money in this market if you are stock-specific,” he said.

Kedia’s SMILE Principle

Kedia said his stock-picking approach is based on the SMILE principle. The framework focuses on companies that are small in size, have experienced management, have large aspirations and operate in markets with significant potential.

“S stands for Small in size,” Kedia said. He prefers smaller companies because they have greater room to grow, giving the example of a Rs 500 crore company potentially becoming a Rs 5,000 crore company over five or 10 years.

“M stands for Medium in experience,” Kedia said, stressing the importance of management that has spent 10-15 years in the same business and has experienced different economic and business cycles. “Jockey is more important than the horse. A horse is also important, but a driver is more important than your car,” he said.

“L stands for Large in aspiration,” Kedia said, arguing that management should continue to have the ambition to grow rather than become satisfied after reaching a particular size. “Management should always talk about growth, growth, and growth,” he said.

“E stands for Extra-large market potential,” Kedia said, highlighting the importance of a growing market around a company. He compared it with a ship moving faster when the wind is flowing in the same direction.

RISE: Kedia’s Future Investment Themes

For his future investments, Kedia said he is focusing on another framework called RISE, covering renewable energy, infrastructure, security and emerging themes.

“R stands for Renewable energy,” Kedia said, pointing to India’s dependence on imported fossil fuels and the long-term potential of renewable energy. He also praised China’s development in futuristic technologies and said India should learn from what it has achieved over the past two decades.

“I stand for Infrastructure,” Kedia said, pointing to India’s requirements across airports, roads, power plants, dams, tunnels and other projects. He said infrastructure spending could remain an opportunity for the next 10-15 years, although companies in the sector can face payment-related challenges.

“S stands for Security,” Kedia said, adding that the theme extends beyond defence to cybersecurity. He said future conflicts could increasingly involve cyberattacks on critical infrastructure such as power plants and airport control systems.

“E stands for Emerging themes,” Kedia said, referring to areas such as data centres, artificial intelligence and the EMS industry. He said these themes could remain relevant over the next 10-15 years, while stressing that a theme does not mean stocks should be bought at any price. “The theme is going to remain there for 10-15 years, this is what I feel,” he said.

Kedia said investors need to remain alert as the market changes, noting that many of the stocks performing strongly today are companies whose names he had not heard before. “Keep your eyes open, invest like a bull, sit like a bear or sit like an eagle, things are changing,” he said.