Warren Buffett’s “when everyone is fearful, be greedy”, so widely quoted that it’s become a cliche, was meant to be applied to the equity markets but applies equally to private credit. Good opportunities for credit investing can be found in the throes of equity market stress. If the Nifty 50’s zero per cent return over the past 18 months and a negative 15% return over this calendar year is any indication, we are in such a market right now.
The equity gridlock
The drop in equity indices, coupled with macro stress from the war in the Middle East, has led major equity brokerages to downgrade India. The ensuing flight of capital, along with the 11% depreciation in rupee in the past 12 months, has really tightened the “easy money” window for primary capital. IPO pipelines are moving at a glacial pace, foreign money is largely outbound, and the investor sentiment has softened. Promoters are finding it very hard to raise capital except at significantly depressed valuations.
However, the “real” economy does not pause; sectors such as healthcare, renewables, chemicals, and infrastructure companies still need capital to run their businesses. When the equity markets become unreliable, these businesses don’t stop growing; they look for capital with certainty. This is where private credit steps in, not as a lender of last resort for the distressed, but as a partner for the ambitious.
Why the “lender” is now in woke
For those of us deploying capital, extended volatility may create conditions in which certain investment opportunities become more readily available:
• The dilution math: Promoters who baulked at 15–17% yields a year ago now find them attractive compared to selling equity at a 25% discount. Structured debt has now become the savvy, non-dilutive alternative.
• The power of choice: As general risk appetite shrinks, competition among lenders fades.
We can now demand stronger security packages, tighter covenants, and better collateral. In a bull market, you chase deals; in this market, the best deals come to you.
The investor’s shield
For the individual or institutional investor, private credit acts as a sophisticated hedge against the chaos of public markets. It offers three distinct advantages:
• Rate resilience: Unlike public bonds, which are sensitive to price swings when interest rates shift, Indian private credit is typically structured with fixed rates and relatively shorter tenors (2–3 years), providing a natural inelasticity against volatility.
• The illiquidity premium: By sacrificing daily liquidity, investors may seek incremental yield over public equivalents. In a volatile market, the lack of daily “mark-to-market” volatility could be psychological relief, although underlying credit risk remains.
• Surgical control: In public bonds, you are a nameless face in a crowd. In private credit, we have a seat at the table. We use bespoke covenants, like cash-flow traps, limitations on capex or M&A and ringfenced collateral to course-correct long before a default is even a whisper.
The bottom line
In the credit game, you don’t win by picking the “hottest” winners; you win by methodically avoiding the losers. When you think about building a disciplined portfolio, the current environment may warrant consideration of private credit as part of a diversified allocation framework. Certain private credit strategies have historically targeted mid teens return profiles and have shown unique risk and return traits compared to Nifty50 or the 10-year government securities (G-secs).
Shantanu Sahai is Executive Director & Head – Private Credit at ASK Alternates.
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