My colleague @KrishnaLohia caught up with @deepak.shenoy , founder of Capitalmind, for the first episode of a new series. “Baby’s First Bear Market”. Below is Krishna’s detailed note from the conversation, packed with insights, stories, and lessons from Deepak’s experience navigating market cycles.
Hi, my name is Krishna. I’m 22—and this is my first bear market.
Over the past four years, I’ve watched markets mostly go up. I started investing during the COVID boom, when everything seemed to rise with each passing month. Somewhere deep inside, I began believing that maybe this is how markets always work.
But this year? Reality hit. Hard. Mid and small caps are down 20–30%, and for the first time, I’m seeing red across my portfolio. And the scarier part? I’ve only read about market corrections. Living through one is a completely different beast.
So, we kicked off a series called “Baby’s First Bear Market” —a simple idea: I talk to people who’ve seen multiple cycles and ask them all the dumb questions I have. The first episode was with Deepak Shenoy, the founder of Capitalmind, and I learned a lot in that one conversation.
This was a selfish project, honestly. I knew I wouldn’t bother reading up unless I had to. But when your job depends on it, and you get to ask someone like Deepak Shenoy anything you want, you sit up and listen.
There were a bunch of things that stood out to me while speaking to Deepak Shenoy:
This Isn’t Even a Proper Bear Market (Yet)
With all the headlines screaming about how bad the markets are, Deepak started by putting things into perspective.
He said that technically, a bear market is when the market falls 20%. And while mid and small caps have dropped that much, the Nifty hasn’t.
“Technical definition is 20% down is a bear market. 20% down has not happened on the Nifty. Nifty is not in a bear market, but the smaller and mid-caps are.”
He also gave some context from the past. For example, between May and July 2004, markets crashed 30%. And even during what he calls the best years for Indian markets—2004 to 2007—there were still some massive corrections:
“In 2006 there was a 33% fall. In 2007 there were there was one 12% fall and another lower circuit on the Nifty in the year that the market went up double, nearly 40% on that year.”
So even when markets are overall doing really well, big drops are totally normal. In fact, the Nifty tripled in just four years during that time—before crashing 80% in 2008.
His point? What we’re seeing right now isn’t some once-in-a-lifetime collapse. It’s just how markets behave. But if you’ve only seen bull markets so far, it can feel a lot scarier than it actually is.
The Psychology of First-Time Losses
One of the most relatable things Deepak talked about was how people like me who have recently entered the markets are just not mentally prepared for market drops.
“Mostly as people who are young, your lives are mostly up in one direction… Every year I give exam, I go to the next class. There is no ‘I failed, I go back two classes down.’… Especially among the most intelligent of people, the issue is that you never faced failure before.”
In school and college, we’re used to things going in one direction: forward. You study, pass exams, and move up. But the markets don’t work that way. Even if you do everything “right”—research stocks, invest regularly—you can still lose money. That messes with your head, because it’s not how we’ve been trained to think.
Deepak shared how his first real bear market came in 2000, and he lost 80% of what he had:
“I had 10,000 bucks, that’s all I had. I didn’t have more money. It was my one month’s salary… It was all my savings and I didn’t have any other savings. So I was miserable for a while.”
It took him seven years just to break even. That kind of experience changes you. You stop expecting quick wins and start focusing on surviving the long haul.
The Selling Dilemma: Easy Out, Hard Return
I asked the question that I guess would be on everyone’s mind atleast it was on mind: “Should I just sell everything right now?”
Deepak said this:
“Selling because of this fear and all that stuff is a little like not writing an exam because it’s too tough… If you don’t bet, you won’t win… If you’re getting out now because of fear, the only thing you should ask yourself is: how do I know when it is time to get back in?”
His point is that selling because you’re scared is easy. But buying back in is really, really hard.
“Selling is easy. Buying back in is not easy… Even with so many years of experience, you still end up with this ‘Should I now get back in? Should I buy back?’”
Unless you have a solid plan for when and how to re-enter the market, selling out might just lock in your losses. It’s like jumping off a train without knowing when the next one will arrive.
The Myth of “Defensive” Sectors
People often say that when markets fall, you should move your money into so-called “defensive” sectors like FMCG or utilities. But Deepak doesn’t really buy that idea.
“I have seen a lot of stocks which are called defensive which are not… They say FMCG is defensive because they grow at a moderate pace. They say that people will always buy toothpaste, for instance, so therefore you should buy toothpaste company. I’m like, ‘Yeah, that’s fine, but if you overpay for a toothpaste company, the same toothpaste is going to yield the same tiny little profit and I’m willing to pay less for that profit.’”
Just because people will keep buying toothpaste doesn’t mean the stock will give good returns—especially if it was overpriced to begin with.
He gave a powerful example from history:
“Between 1973 and 1982—nine years—there were a set of companies in the US called the Nifty Fifty… they said these stocks are fantastic, they can never go down, you just buy them forever. Except the next 8 years they almost fell 90%. And of this, one of them was McDonald’s. McDonald’s had a 3% stock price CAGR over 10 years.”
Even McDonald’s, a company you’d think is always safe, gave really poor returns for an entire decade—not because it was a bad business, but because investors overpaid.
The Birth of Multi-Baggers in Bear Markets
Instead of hiding in “safe” sectors, Deepak says bear markets are actually where some of the best opportunities show up.
“The weirdest of companies emerge through bearish markets… Bajaj Finance, when it came out, they said ‘What do these Bajaj people know about lending? They make scooters!’ …and that guy turned this thing around, and within 10 years it was a 15x, 50x, 100x, I don’t know, some crazy number like that.”
It’s a great reminder that the next big winners don’t always look obvious when times are tough. But if you’re willing to dig deep and take a long-term view, these periods can be full of hidden gems.
FII Flows: Much Ado About Nothing?
A lot of people are panicking because Foreign Institutional Investors (FIIs) are pulling money out of India. But Deepak says this isn’t something to lose sleep over.
“By and large they come in. I mean, they’ve gone only 6 months. By the end of the year, they may be back. We’re cribbing about some 6 months and 300,000 crores. It’s not much, that’s only about 3% of their portfolio… Are you saying that they shouldn’t even sell 3% of their portfolio? I think that’s crazy.”
Basically, these kinds of outflows are part of a normal cycle. They adjust their investments based on global trends, and just because they’re selling now doesn’t mean they’ve given up on India.
“I think more money will come later if they go. If it goes now, so let it go. It’s just normal cyclical moves.”
Macroeconomic Disconnect: Bad Markets, Strong Economy
This was actually one of the more surprising things he said.
“I honestly I don’t see any problem with the economy. The government finances are fantastic. Our imports and exports, the deficit is actually much under control. We have a tremendous amount of business activity going on, economic activity going on. So I don’t think this is a bad economy. It’s just bad markets, but that’s fine.”
The economy can be doing fine even when the markets aren’t. They don’t always move in sync. Sometimes, markets behave badly even when all the big-picture numbers are looking good.
The Leverage Lesson: Only Borrow What You Can Lose
Deepak was very honest about using leverage, or borrowed money, to invest. He’s done it himself, but with caution.
“I have done it even in the recent past… But I know what I can take and what I can’t. For me, it doesn’t matter to me as much, even a 30% fall would not hurt me. So I would still stay invested.”
The key is to know your personal risk tolerance. Borrow only what you can emotionally and financially afford to lose.
“Only take how much you can lose.”
The Portfolio Diagnosis: IRR vs. Current Value
If you’re upset about your portfolio right now, Deepak says you might be looking at the wrong thing. Don’t just focus on the current value. Instead, look at your returns over time—your IRR (Internal Rate of Return).
“What you should look at really is your own track record in terms of an IRR of sorts… It’s basically how much your money has earned for you or how much you made out of your own money.”
Just because you’ve had a bad year doesn’t mean you’ve done badly overall.
“Many times people hate it because the last one year has been bad, but the three or four year cyclical return is actually quite good.”
The Weather Analogy: Market Seasons and Adaptability
Deepak had a great analogy for how to think about markets.
“It’s like rain. Bad weather will come, you know it will go away… Even in the coasts where it rains a lot, it does stop raining at some point. So you just wait for it to happen… If it’s raining for three months, then we’ll live through those three months.”
Markets have seasons, just like weather. Sometimes it rains, sometimes it shines. You don’t panic because it’s raining—you just adjust.
“Maybe you don’t buy the companies that you think will grow in the next 3 months or 6 months because nothing will happen in the next three months or six months. You want to buy more stable companies and stick with that. And then when the opportunities start to arise again, you’re going to get more aggressive in your portfolios.”
The Institutional Advantage: Why Fund Managers Stay Calmer
Deepak also shared something interesting about how institutions behave during market dips. The people who panic the most? Newer investors.
“I find that the biggest questions will come from people who have come one year ago. The people who have come three or four years ago have seen a cycle.”
This is why fund managers and experienced investors often seem calmer—they’ve seen this before. That experience helps them stay grounded.
Final Thought
At the end of the day, Deepak summed it all up with one simple truth:
“I think you just have to live through the storm. That’s the whole consequence of it.”
There’s no hack. No perfect plan. You just have to go through it. It’ll suck. But if you make it out the other side, you’ll be a much better investor for it.
The investors who accept this reality—rather than fighting it—will emerge not just with their capital intact, but with the psychological fortitude that only experience can build.
There are so many interesting and insightful things that he shared. I had a great time talking to him and I hope you enjoy this conversation too 
