Public market investing is changing quickly in India. As of FY24, retail investors make up more than 36% of equity trades, according to India Brand Equity Foundation (IBEF) data. Thus, risk assessment is equally important before investing in public markets with a private equity mindset. Let’s get into more detail on how you can maximise your equity.
What Does a Private Equity Mindset Really Mean?
Investing in public markets with a private equity mindset means following smart, focused strategies. This includes thinking long-term, doing deep research, and staying away from frequent trading.
Private equity focuses on investing in businesses, not just stocks. This approach requires patience, understanding of risks, and a long-term view.
Here are the core traits of a private equity mindset:
| Private Equity Trait | Public Market Equivalent |
| Long-term ownership | Holding quality stocks for 5+ years |
| Deep due diligence | This involves the study of balance sheets and industry trends |
| Operational involvement | Following management actions and earnings |
| Value-based buying | Investing at a discount to a significant value |
Key Investment Strategies in Public Markets Using PE Principles
Using practical and research-backed methods, let’s break down how to invest in public markets with a private equity mindset.
1. Focus on Business, Not Just Stock Price
Ask if this is a company you want to own, just like a private equity investor would. Think about its long-term value, strength, and growth potential. You can adopt this mindset by evaluating the following:
- Revenue visibility: Examples include long-term contracts and a consistent customer base
- Profitability and margins: Consider looking for consistent EBITDA margins
- Return on capital employed (ROCE): You should go for above 15%
- Promoter holding and pledging: Having a high holding and no pledges is preferred
2. Invest Only When There’s a Margin of Safety
Do not buy when prices are too high. Instead, check if a stock is fairly priced by using valuation tools like:
| Metric | Ideal Range (for long-term PE-style investing) |
| Price to Earnings (P/E) Ratio | Less than 20 (for stable businesses) |
| Price to Book (P/B) Ratio | Less than 3 (unless it’s a tech firm or high ROE stock) |
| PEG Ratio | Less than 1.5 |
3. Stay Illiquid in Mindset (Even if Markets are Liquid)
Private equity holds investments for 5–10 years. While public market investors can exit daily, try to hold through business cycles. Avoid frequent trades. Platforms like Dhan offer detailed trade analytics so you can track your holding periods and reduce unnecessary churn.
4. Build a Concentrated, High-Conviction Portfolio
Private equity investors do not spread their money too thin. They invest in a few strong companies they truly believe in.
You can follow the same approach:
- Hold 10–15 high-quality stocks max.
- Avoid owning stocks in the same sector (e.g., not all PSU banks).
- Rebalance annually, not quarterly.
Developing a Strong Investment Philosophy
Your investment philosophy defines how you think about markets. Here’s a sample framework inspired by private equity:
Core Beliefs:
- Most of the time, the market misprices businesses in the short term.
- Long-term earnings growth drives the share price.
- Quality trumps momentum.
Your Filters:
- Go for companies with no heavy debts.
- Consider firms that have at least 10 years of history.
- The ROCE should be above 15%, have consistent dividends, and be a key promoter of integrity.
Benefits of Public Market Investment with Private Equity Principles
Applying a private equity mindset to public markets is not just a mindset shift—it has tangible benefits:
| Benefit | Description |
| Offers access to lower costs and higher flexibility | There are no lock-in periods. Low fees are offered on platforms like Dhan |
| Investors can have daily liquidity with a long-term focus | Best of both worlds |
| There is transparent performance tracking, allowing investors to monetise their investments properly | Allows the use of in-app analytics to measure results |
| Offers faster response when it comes to red flags | Allowing exit in the case of fundamentals changing significantly |
Where to Start: Tools and Platforms That Help
To practise this approach, you need robust tools for research, screening, and execution. Here’s how the Dhan supports it:
Dhan Platform Features for PE-style Investors
| Feature | How It Helps |
| Brokerage as low as ₹0 | Reduces long-term compounding drag |
| Fundamental screeners | Filter by ROE, ROCE, debt/equity, profit growth |
| Portfolio health analytics | Spot over-diversification or sector bias |
| IPO & Smallcase integration | Build thematic baskets based on sectors or models |
What Sets PE-Minded Investors Apart?
Start by analysing your current portfolio through a PE lens—would you buy the whole business at its current valuation? If the answer’s no, it might be time to reframe your investment philosophy.
You don’t need a PE fund’s millions to think like one. You need:
- Patience over panic.
- Insight over instinct.
- Quality over quantity.
You can also join Dhan’s Made For Trade Community to learn from experienced investors, get real case studies, and stay updated on market insights.
