In an exclusive conversation, Shah breaks down the core investment philosophies, highlights key growth drivers, and explains how bottom-up stock selection, valuation discipline, and a long-term mindset have been pivotal in delivering alpha and building investor trust. Edited Excerpts –
Q) The month of May began with significant volatility in the markets. How are you reading the current sentiment?A) The recent volatility in Indian equity markets is largely driven by a combination of global macro uncertainties and geopolitical developments.However, it is important to view this in the context of a market that has delivered strong returns over the past few years with relatively fewer drawdowns.
Some degree of consolidation was expected and, arguably, healthy. From a medium- to long-term perspective, we continue to be constructive.
India’s economic fundamentals remain strong, driven by robust domestic consumption, infrastructure push, and digital transformation.
We believe volatile times offer opportunities for long-term investors to build positions in fundamentally strong businesses at more reasonable valuations.Q) What’s your takeaway from the March quarter earnings? Are downgrades outweighing upgrades?A) The March 2025 quarter has offered a mixed earnings picture. On the positive side, sectors such as banking, capital goods, and consumer services have shown resilience, supported by improving credit growth, operational efficiencies, and healthy balance sheets.However, there have been disappointments too, particularly in pockets of the export and discretionary consumption space, where demand has been more uneven.
We are seeing more divergence in earnings this quarter. This underscores the need for selective, bottom-up investing and a stronger focus on valuation discipline in this environment.
Q) What’s your long-term outlook for Indian equities?A) We remain structurally bullish on Indian equities. Despite near-term global headwinds, India offers a compelling long-term growth story supported by favorable demographics, formalization of the economy, digital adoption, and a strong investment cycle led by both public and private sectors.
However, current valuations in some segments, especially in mid and small caps, are elevated compared to historical averages.
Therefore, a diversified portfolio and a disciplined investment approach, will be key to navigating this cycle and generating sustainable wealth.
Q) Which sectors look promising from a returns perspective? Are there any defensives or ‘safe bets’?A) We see strong earnings potential in capex-linked sectors over the next few years. Infrastructure, financials, and consumer services are particularly well-positioned.
Financials, especially large banks, are set to benefit from economic expansion and improving credit demand. Consumer services are seeing tailwinds from rising disposable incomes and evolving consumption patterns.
Additionally, infrastructure continues to be a structural theme backed by government push and rising corporate capex.
While these are not defensive in the traditional sense, their long-term fundamentals and policy support make them relatively more predictable in an otherwise uncertain environment.Q) How should HNIs build wealth in the current market environment?A) We have had an extended bull run since the pandemic, with very limited drawdowns until recently. A phase of moderation was inevitable.
HNIs should recalibrate their return expectations and focus on the fundamentals i.e. proper asset allocation, portfolio diversification, and staying invested through cycles.
Volatility is inherent to equities, but it also presents opportunities.Q) What are the key growth drivers for the PMS industry in the years ahead?A) The PMS industry is evolving rapidly, driven by the growing need for bespoke investment solutions, rising HNI wealth, and greater awareness of differentiated strategies beyond traditional mutual funds.
As investors seek alpha in an increasingly mature market, demand for disciplined, transparent, and well-researched portfolio strategies is rising.
Technology is also enabling better portfolio access and reporting, while regulation is enhancing credibility with regards to differentiated offerings. All these factors are expected to propel the PMS industry forward meaningfully.
Q) ICICI Prudential AMC topped the PMS industry by AUM in FY25. What drove this growth, and what’s your core investment strategy?A) At ICICI Prudential AMC, the PMS vertical operates like a boutique within an institution—offering niche, research-intensive strategies under the umbrella of institutional discipline.
Being one of the top players in the Equity PMS Discretionary segment is a result of our consistent investment philosophy and the trust of our clients.
Our core investment approach is built around the BMV (Business, Management, Valuation) framework. We focus on quality businesses with capable managements and invest at reasonable valuations.
A robust research team supports bottom-up stock selection, while our independent risk team ensures portfolio quality and oversight.
This process-driven approach, combined with a long-term wealth creation mindset, has helped us deliver superior outcomes for our investors, which in turn aids the growth of the PMS segment.
ICICI Prudential PMS’ PIPE Strategy has delivered nearly 37% annualised returns over the past five years, while the Value Strategy has also compounded at around 30% CAGR.
Q) What has driven this strong performance? Could you elaborate on the investment philosophy and stock selection process behind these strategies?A) Over the past five years, both our PIPE and Value Strategies have delivered strong performance. This outperformance is rooted in our disciplined, bottom-up investment approach and a sharp focus on intrinsic value.
The PIPE Strategy has benefited from the broader re-rating in the mid- and small-cap segments. Our focus has been on identifying emerging leaders with strong economic moats, robust balance sheets, and credible management teams.
We look for companies at inflection points where capital infusion can act as a catalyst for growth. Valuation comfort remains a non-negotiable criterion in our stock selection process.
Similarly, our Value Strategy is centered on investing in fundamentally strong businesses trading at a discount to their intrinsic worth.
We prioritize companies with sustainable earnings profiles, sound capital allocation, and the potential for long-term re-rating.
Often, these are businesses operating in cyclical or contrarian sectors, where patient capital can benefit from mean reversion and structural improvements.
In both these strategies, our commitment to rigorous research has allowed us to consistently identify and invest in resilient businesses with long-term wealth creation potential.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
