How peak pessimism creates best wealth creation opportunities in markets

Periods of extreme fear and uncertainty in financial markets often create the strongest long-term wealth-creation opportunities, according to veteran investors Vikas Khemani and Pankaj Tibrewal, who believe disciplined investors should focus on long-term business fundamentals rather than short-term panic.

Speaking at Groww’s India Investor Festival, the two market veterans said corrections driven by geopolitical tensions, economic uncertainty and negative sentiment have historically turned into powerful entry points for patient investors.

Peak pessimism

Vikas Khemani, founder of Carnelian Asset Management Advisors, said investors frequently make the mistake of avoiding markets during periods of peak pessimism, even though those phases often offer the best valuations.

“Peak pessimism is always the best opportunity to invest,” Khemani said.

Referring to events such as Covid, tariff-related corrections and geopolitical tensions, he pointed out that markets tend to recover sharply after periods of maximum uncertainty.

“The market bottomed out when the Covid lockdown happened. When tariffs were announced, markets bottomed around that period. Same way, when the Iran conflict started, markets bottomed and then started recovering,” he said.

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According to Khemani, successful investing requires separating temporary fear from long-term structural business strength.

“Good news and good prices don’t come together,” he said. “The lower the price you buy, the better the outcome would be.”

He stressed that investors should focus on identifying “rate of change” in companies and industries rather than simply buying cheap stocks.

“If you want to make big money, focus on rate of change. What is changing positively before others notice it — that is where the opportunity lies,” Khemani said.

He cited PSU banks as a major example where improving governance, technology adoption and asset quality created significant wealth despite widespread pessimism around the sector earlier.

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Smart money

Pankaj Tibrewal, founder of Ikigai Asset Managers, said long-term investing often requires going against consensus and remaining patient during uncomfortable market phases.

“Smart money is a lonely journey in a crowded market,” Tibrewal said.

According to him, inflationary conditions, supply-chain disruptions and global uncertainty are reshaping sector leadership across markets, creating opportunities for businesses with strong balance sheets and cash-flow discipline.

“In every sector, leaders will gain disproportionately during inflationary periods,” he said.

Tibrewal explained that many multi-bagger opportunities emerge when earnings temporarily weaken but underlying cash flows and business quality remain intact.

“Whenever cash-flow yields reach around 5.5% to 6%, and the business model is intact, those opportunities can become multi-baggers when sentiment revives,” he said.

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Long-term wealth-creation markets

Despite foreign investor outflows and periodic market volatility, both investors said India continues to remain one of the strongest long-term wealth-creation markets globally.

Khemani noted that India has consistently delivered strong returns over long periods compared with most global markets.

“India is one of the best-performing markets globally over 25 years in dollar terms, very close to the US,” he said.

He also highlighted how growing domestic participation has made Indian markets more resilient than in earlier decades.

“Once upon a time, if FIIs sold a billion dollars, markets would collapse. Today they have sold tens of billions and markets are still near all-time highs,” Khemani said.

Tibrewal, meanwhile, warned investors against blindly chasing fashionable themes such as AI-driven rallies or speculative sectors.

“AI is real, but financial markets may be pricing something much larger than reality,” he said.

Both investors advised retail investors to avoid blindly copying portfolios and instead build their own conviction through research and patience.

“You can learn from others, but you cannot make money out of borrowed conviction,” Khemani said.

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