Latest news with #AniruddhaSarkar
Economic Times
6 days ago
- Business
- Economic Times
The Golden Thumbrule on identifying the next big sector to invest
In a market where sentiment swings faster than fundamentals, spotting a sector turnaround before it becomes a consensus trade is a rare edge. In Episode 1 of The Golden Thumbrule, Kshitij Anand sits down with Aniruddha Sarkar, CIO & Portfolio Manager at Quest Investment Advisors, who's built a reputation for identifying sectoral inflection points early. From the meteoric rise of PSUs, defence, and power stocks to his playbook for distinguishing a short-term buzz from a secular boom, Sarkar shares his golden thumb rule for wealth creation and when to you'll learn in this episode:The timeless rule of wealth creationHow to spot the next big sector before everyone elseHis checklist: capital flow, consumer behavior, innovation, and policySigns a trend is short-term vs. secularFrameworks for knowing when to exitWhy the best opportunities lie where no one is looking Show more 23:29 17:26 09:01 32:32 17:30 02:04 21:28 25:50 08:14 20:53 10:56 09:24 21:36 48:10 20:39 20:00 15:46 11:54 08:28 09:57 15:30 09:41 02:48 07:36 07:57 04:40 13:50 05:17 04:48 09:21 05:20 02:15 02:35 03:25 07:26 12:35 19:12 08:31 08:10 16:39
Time of India
6 days ago
- Business
- Time of India
The Golden Thumbrule on identifying the next big sector to invest
In a market where sentiment swings faster than fundamentals, spotting a sector turnaround before it becomes a consensus trade is a rare edge. In Episode 1 of The Golden Thumbrule, Kshitij Anand sits down with Aniruddha Sarkar, CIO & Portfolio Manager at Quest Investment Advisors, who's built a reputation for identifying sectoral inflection points early. From the meteoric rise of PSUs, defence, and power stocks to his playbook for distinguishing a short-term buzz from a secular boom, Sarkar shares his golden thumb rule for wealth creation and when to you'll learn in this episode:The timeless rule of wealth creationHow to spot the next big sector before everyone elseHis checklist: capital flow, consumer behavior, innovation, and policySigns a trend is short-term vs. secularFrameworks for knowing when to exitWhy the best opportunities lie where no one is looking Show more Show less
Economic Times
14-07-2025
- Business
- Economic Times
The Golden Thumbrule: Is it time to exit? Aniruddha Sarkar's playbook for spotting sector wear and tear
Agencies That's when valuations are comfortable. And when everyone is talking about a sector—when it's the hot theme of the day—that's the time to get a bit cautious and start taking some chips off the table. In the second part of 'The Golden Thumbrule' series, Aniruddha Sarkar delves into the other side of the market cycle—the fall from grace. While identifying emerging sectors early is a known path to wealth creation, knowing when to step away from once-loved sectors is equally critical for preserving gains. From paints to IT and FMCG, sectors that were once the toast of the markets are now navigating challenging terrain. Sarkar breaks down why this happens—be it valuation excesses, margin pressures, or structural fatigue—and how investors often miss early warning signs hidden beneath the surface. He also addresses the age-old investor dilemma: When do you exit a sector that's still popular but showing signs of wear and tear? With insights into valuation metrics like the PEG ratio and the role of earnings support, Sarkar lays out a simple but powerful framework for timing exits. Above all, he reiterates a timeless investing principle: The best opportunities often lie in sectors no one is looking at—just before they turn into market favorites. Edited Excerpts – Kshitij Anand: We have talked about sectors that have gone from zero to hero, but let us talk about sectors that have gone from hero to zero. Paint, IT, FMCG—you could say they were once the darlings of the capital markets, but now, not so much. So, what usually causes this fall from grace? Or is it just that the cycle has played out and now it's time to book profits? What are your views on that? Aniruddha Sarkar: See, I would say that obviously, each of these sectors you mentioned—and in fact, if you look at the companies within these sectors—they continue to be world-class companies, exceptionally well-managed, with top-quality management. Where they may not have performed well on the equity market side is that, as I always tell investors and my team, excesses happen on both sides—on the upside and on the each of these sectors had its own issues. If I go back to the paint industry—before getting into the issues—what was happening is that, for five to ten years, these sectors saw a good upcycle, which I would say was structural. As a result, valuations went through the roof. When that happens, and then a couple of years of disappointment follow, that's when multiples start of these sectors had their own pain points. In the paint industry, for instance, there was never this level of competition before. Now, you have big players entering the space. The pie remains the same, and with two large players entering, margins and market share are bound to take a hit. Also, there is a lot of M&A activity happening in the paint industry, which adds to the disruption. So, we saw margin contraction, and top-line and bottom-line growth got impacted. In the IT industry, there was a golden period during COVID. Everyone was working from home, companies were saving costs as employees weren't traveling overseas, and margins improved. On top of that, every business wanted to migrate to the cloud—and Indian companies were best placed to help. It was a golden period. But the market extrapolated that this golden period would continue forever—which doesn't happen. Markets don't work that way. In the last couple of years, we've seen deal pipelines weakening, margins contracting, attrition going up, and uncertainty in the US and Europe—all of which have led to IT project delays. All this caused a multiple contraction from the highs of the COVID FMCG, demand from rural India, especially the agri side, remained weak for most of the last couple of years. Although demand has picked up in the past year, earlier it was very weak. Raw material prices had gone up, margins contracted, and most FMCG stocks trade at 40x, 50x, even 60x P/E. If a stock trades at 60x earnings and grows earnings at just 10%, accidents are bound to I would say these sectors all had their golden period, and now they're going through a painful phase of multiple contraction. Kshitij Anand: Let me also quickly ask a related question. Is underperformance always about expensive stocks correcting? Or are there hidden structural issues that we often miss until it's too late? Aniruddha Sarkar: I would agree with the second part. Typically, what happens—as I mentioned earlier—is that excesses happen on both sides. When things are going well, people are willing to pay any price for good news. And what happens is, good news gets amplified, while bad news gets swept under the carpet. It's only when the bad news under the carpet becomes too large and starts causing pain that people lift the carpet and see what's really underneath. That's what leads to underperformance.A good example is private banks. They had a golden period where they consistently outperformed PSU banks. This was during the NPA cycle, when PSU banks were the most hated segment, and private banks were the darlings of the Street. Private banks traded at 4x price-to-book; PSU banks traded at 0.4x. That was a massive when the NPA cycle ended and PSUs started showing good numbers—ROEs, ROAs, everything improved—the question arose: if the operating metrics aren't vastly different anymore, why should valuations be so different? So, PSU banks' valuations moved up, and private banks saw valuation contraction—from 4x price-to-book to 1.7– during this period, it's not like private banks weren't growing. They were still growing at 15–18%, had excellent management, solid teams, and great brands. But they still went through a painful period of multiple contraction. Why? Because the market constantly weighs I'm an investor or a portfolio manager, I can't invest in 100 or 200 companies. I have to weigh idea A against idea B. And when you see that one trades at 8x the valuation of the other, you start questioning if that difference is in one line—underperformance is a result of valuation contraction in expensive stocks, and a valuation upcycle in under-owned or undervalued ones. Kshitij Anand: In fact, the next thing I wanted to ask—and I'm sure our viewers watching this show would also want to ask—is actually putting you in a bit of a spot. As a portfolio manager, how do you decide when to exit a sector, especially one that is still popular but showing signs of what we call wear and tear? Aniruddha Sarkar: It's a very difficult question you've asked me. And to be honest, I wish… Kshitij Anand: I gave the disclaimer at the beginning. Aniruddha Sarkar: No, absolutely. I would say it's a very difficult question because, to be honest, you can't always get your exits right. There have been many instances when, after seeing a sector hit its highs and then decline, you feel, "I should have exited back then." That's a natural reaction—for both investors and portfolio managers like yes, over the years, I would say there are certain guiding rules that help reduce the mistakes I used to make 18–20 years ago. One simple rule I always follow—and tell investors as well—is this: are the earnings supporting the valuations?That's the most important factor, because ultimately, everything boils down to earnings growth. Valuations can move from a PE of 10 to 50, but if earnings don't grow, that 50 PE will eventually return to 10. When that happens, a hot stock can suddenly become a hated stock. However, if earnings grow at 25%, 30%, or 40% CAGR during that period, it supports the multiple the most important factor in deciding whether to exit or reduce exposure in a sector is tracking whether the earnings support the multiple. That brings me to a basic metric—the Price-to-Earnings Growth (PEG) ratio. If the PEG ratio exceeds 2, it's a sign of caution. There's no magic number, but 2x is my internal benchmark. A PEG above 2 signals that the market may be pricing in more than what the company is actually delivering. Conversely, a PEG below 1 is attractive, meaning earnings are growing faster than the market is pricing key sign to watch is if the price movement is outpacing earnings growth. A company may be doing well, but sometimes, there's too much capital chasing too few ideas. And thanks to WhatsApp groups these days, a new idea gets shared, and within 10 days, a stock can go from attractively priced to expensive. If price appreciation and multiple expansion happen faster than earnings growth, that's another warning sign—it's often better to book profits in such cases. Aniruddha Sarkar: In fact, I mentioned this almost at the beginning of our discussion, and I'll come back to it because it truly is the golden rule of investing—anywhere in the world. If no one is looking at a sector—or it's a hated sector—that's the time to start looking at it. The moment it becomes the most recommended sector by everyone in the market, that's the time to be cautious and consider reducing your are plenty of examples. As I mentioned earlier, 24–36 months ago, when I was bullish on PSUs and defence, I used to spend hours explaining why those sectors deserved attention. Just six months ago, the same people were telling me why defence is a good sector. Now, obviously, defence stocks have surged because of geopolitical developments like the Indo-Pak tensions and increased defence manufacturing. But that just proves the the golden rule is: start looking at sectors and companies when no one else is. That's when valuations are comfortable. And when everyone is talking about a sector—when it's the hot theme of the day—that's the time to get a bit cautious and start taking some chips off the table.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Time of India
14-07-2025
- Business
- Time of India
The Golden Thumbrule: Is it time to exit? Aniruddha Sarkar's playbook for spotting sector wear and tear
In the second part of 'The Golden Thumbrule' series, Aniruddha Sarkar delves into the other side of the market cycle—the fall from grace. While identifying emerging sectors early is a known path to wealth creation, knowing when to step away from once-loved sectors is equally critical for preserving gains . From paints to IT and FMCG, sectors that were once the toast of the markets are now navigating challenging terrain. Sarkar breaks down why this happens—be it valuation excesses, margin pressures, or structural fatigue—and how investors often miss early warning signs hidden beneath the surface. He also addresses the age-old investor dilemma: When do you exit a sector that's still popular but showing signs of wear and tear? With insights into valuation metrics like the PEG ratio and the role of earnings support, Sarkar lays out a simple but powerful framework for timing exits. Above all, he reiterates a timeless investing principle: The best opportunities often lie in sectors no one is looking at—just before they turn into market favorites. Edited Excerpts – Kshitij Anand: We have talked about sectors that have gone from zero to hero, but let us talk about sectors that have gone from hero to zero. Paint, IT, FMCG—you could say they were once the darlings of the capital markets, but now, not so much. So, what usually causes this fall from grace? Or is it just that the cycle has played out and now it's time to book profits? What are your views on that? Aniruddha Sarkar: See, I would say that obviously, each of these sectors you mentioned—and in fact, if you look at the companies within these sectors—they continue to be world-class companies, exceptionally well-managed, with top-quality management. Where they may not have performed well on the equity market side is that, as I always tell investors and my team, excesses happen on both sides—on the upside and on the downside. Now, each of these sectors had its own issues. If I go back to the paint industry—before getting into the issues—what was happening is that, for five to ten years, these sectors saw a good upcycle, which I would say was structural. As a result, valuations went through the roof. When that happens, and then a couple of years of disappointment follow, that's when multiples start contracting. Each of these sectors had their own pain points. In the paint industry, for instance, there was never this level of competition before. Now, you have big players entering the space. The pie remains the same, and with two large players entering, margins and market share are bound to take a hit. Also, there is a lot of M&A activity happening in the paint industry, which adds to the disruption. So, we saw margin contraction, and top-line and bottom-line growth got impacted. Live Events In the IT industry, there was a golden period during COVID. Everyone was working from home, companies were saving costs as employees weren't traveling overseas, and margins improved. On top of that, every business wanted to migrate to the cloud—and Indian companies were best placed to help. It was a golden period. But the market extrapolated that this golden period would continue forever—which doesn't happen. Markets don't work that way. In the last couple of years, we've seen deal pipelines weakening, margins contracting, attrition going up, and uncertainty in the US and Europe—all of which have led to IT project delays. All this caused a multiple contraction from the highs of the COVID era. In FMCG, demand from rural India, especially the agri side, remained weak for most of the last couple of years. Although demand has picked up in the past year, earlier it was very weak. Raw material prices had gone up, margins contracted, and most FMCG stocks trade at 40x, 50x, even 60x P/E. If a stock trades at 60x earnings and grows earnings at just 10%, accidents are bound to happen. So, I would say these sectors all had their golden period, and now they're going through a painful phase of multiple contraction. Kshitij Anand: Let me also quickly ask a related question. Is underperformance always about expensive stocks correcting? Or are there hidden structural issues that we often miss until it's too late? Aniruddha Sarkar: I would agree with the second part. Typically, what happens—as I mentioned earlier—is that excesses happen on both sides. When things are going well, people are willing to pay any price for good news. And what happens is, good news gets amplified, while bad news gets swept under the carpet. It's only when the bad news under the carpet becomes too large and starts causing pain that people lift the carpet and see what's really underneath. That's what leads to underperformance. A good example is private banks. They had a golden period where they consistently outperformed PSU banks. This was during the NPA cycle, when PSU banks were the most hated segment, and private banks were the darlings of the Street. Private banks traded at 4x price-to-book; PSU banks traded at 0.4x. That was a massive difference. But when the NPA cycle ended and PSUs started showing good numbers—ROEs, ROAs, everything improved—the question arose: if the operating metrics aren't vastly different anymore, why should valuations be so different? So, PSU banks' valuations moved up, and private banks saw valuation contraction—from 4x price-to-book to 1.7–2x. Now, during this period, it's not like private banks weren't growing. They were still growing at 15–18%, had excellent management, solid teams, and great brands. But they still went through a painful period of multiple contraction. Why? Because the market constantly weighs opportunities. If I'm an investor or a portfolio manager, I can't invest in 100 or 200 companies. I have to weigh idea A against idea B. And when you see that one trades at 8x the valuation of the other, you start questioning if that difference is justified. So, in one line—underperformance is a result of valuation contraction in expensive stocks, and a valuation upcycle in under-owned or undervalued ones. Kshitij Anand: In fact, the next thing I wanted to ask—and I'm sure our viewers watching this show would also want to ask—is actually putting you in a bit of a spot. As a portfolio manager, how do you decide when to exit a sector, especially one that is still popular but showing signs of what we call wear and tear? Aniruddha Sarkar: It's a very difficult question you've asked me. And to be honest, I wish… Kshitij Anand: I gave the disclaimer at the beginning. Aniruddha Sarkar: No, absolutely. I would say it's a very difficult question because, to be honest, you can't always get your exits right. There have been many instances when, after seeing a sector hit its highs and then decline, you feel, "I should have exited back then." That's a natural reaction—for both investors and portfolio managers like us. But yes, over the years, I would say there are certain guiding rules that help reduce the mistakes I used to make 18–20 years ago. One simple rule I always follow—and tell investors as well—is this: are the earnings supporting the valuations? That's the most important factor, because ultimately, everything boils down to earnings growth. Valuations can move from a PE of 10 to 50, but if earnings don't grow, that 50 PE will eventually return to 10. When that happens, a hot stock can suddenly become a hated stock. However, if earnings grow at 25%, 30%, or 40% CAGR during that period, it supports the multiple expansion. So, the most important factor in deciding whether to exit or reduce exposure in a sector is tracking whether the earnings support the multiple. That brings me to a basic metric—the Price-to-Earnings Growth (PEG) ratio. If the PEG ratio exceeds 2, it's a sign of caution. There's no magic number, but 2x is my internal benchmark. A PEG above 2 signals that the market may be pricing in more than what the company is actually delivering. Conversely, a PEG below 1 is attractive, meaning earnings are growing faster than the market is pricing in. Another key sign to watch is if the price movement is outpacing earnings growth. A company may be doing well, but sometimes, there's too much capital chasing too few ideas. And thanks to WhatsApp groups these days, a new idea gets shared, and within 10 days, a stock can go from attractively priced to expensive. If price appreciation and multiple expansion happen faster than earnings growth, that's another warning sign—it's often better to book profits in such cases. Aniruddha Sarkar: In fact, I mentioned this almost at the beginning of our discussion, and I'll come back to it because it truly is the golden rule of investing—anywhere in the world. If no one is looking at a sector—or it's a hated sector—that's the time to start looking at it. The moment it becomes the most recommended sector by everyone in the market, that's the time to be cautious and consider reducing your exposure. There are plenty of examples. As I mentioned earlier, 24–36 months ago, when I was bullish on PSUs and defence, I used to spend hours explaining why those sectors deserved attention. Just six months ago, the same people were telling me why defence is a good sector. Now, obviously, defence stocks have surged because of geopolitical developments like the Indo-Pak tensions and increased defence manufacturing. But that just proves the point. So, the golden rule is: start looking at sectors and companies when no one else is. That's when valuations are comfortable. And when everyone is talking about a sector—when it's the hot theme of the day—that's the time to get a bit cautious and start taking some chips off the table.
Economic Times
10-07-2025
- Business
- Economic Times
The Golden Thumbrule: From Hated to Hot - Aniruddha Sarkar on spotting sector turnarounds before the crowd
In a market where sentiment can swing faster than fundamentals, identifying a sector turnaround before it becomes a consensus trade is nothing short of a superpower. Aniruddha Sarkar, CIO and Portfolio Manager at Quest Investment Advisors, has built a reputation for doing just that—spotting inflection points in sectors long before they capture the market's imagination. In this candid conversation with Kshitij Anand for 'The Golden Thumbrule' series, Sarkar shares the golden thumb rule that has guided his investment decisions, how he identified the meteoric rise of PSUs, defence, and power stocks, and why being early (and often contrarian) can be the biggest edge in wealth creation. Edited Excerpts – ADVERTISEMENT Kshitij Anand: Well, you've hit the nail on the head that the time of making easy money is behind us. Let's quickly hit the ground running. So, according to you, what is the single most time-tested rule for wealth creation and preservation in Indian equities? Aniruddha Sarkar: See, one thing I've observed over the last 18–20 years in the Indian markets—and to some extent this holds true for most emerging markets—is that the beauty of emerging markets like India is that almost every year, you find new companies, new sectors getting listed, raising capital. There's always some policy change happening—be it local or global. I would say international realignments of policy are occurring, and thanks to Mr. Trump, we've seen those happening more frequently these days. So, I would say the single most important rule for wealth creation—especially in the Indian context—is to be early in identifying a sectoral theme. Be there before others, and that's where we've seen the biggest wealth creation happen. There are ample examples. If you look at the last 10, 15, 20, even 30 years, any big wealth creation—from the IT boom of the late '90s to any other major rally—has always been about catching a sectoral theme early on. Be invested while the theme is playing out. Don't exit early. That's very important. Don't exit early, and that's where both wealth creation and preservation happen. Kshitij Anand: In fact, you often talk about catching sectoral changes early. Honestly, that sounds like a superpower to some. I'm sure it's easier for you, but can you walk us through your personal playbook for identifying these shifts?Aniruddha Sarkar: As you mentioned, I often get asked how to identify a sectoral trend. And I always say, there's no magic formula, to be honest. Also, there's no one—at least to my knowledge—who has been able to identify every trend 100% of the time. You actually don't need to be right all the time. Even if you get it right 75% to 80% of the time, your job of beating the market is as for what I look for to identify sectoral trends—first and foremost is capital allocation. Where in the economy is capital moving? That's a strong indicator of where the next big growth area is likely to come from. And businessmen are no fools—they know where to invest for returns. So, I always say: follow the capital flow in the economy. ADVERTISEMENT Second, a good sign is any big change in consumer behavior. That also gives you a strong signal. For example, if you talk about EVs, is there a shift in consumer preference from petrol-diesel vehicles to EVs?Now, linking back to the earlier point on capital allocation—are companies like Mahindra and Tata investing more and more into EV manufacturing? That's a cue. And then, does consumer preference reflect that shift? That's the second big factor. ADVERTISEMENT The third is technological change or innovation. Is there a fundamental change in the traditional way of doing things? And again, is capital flowing toward this innovation? Take renewable energy, for instance. Over the past few years, we've seen significant capital moving toward it. The cost of solar power production has dropped sharply, making it commercially viable. This is a classic case where technological innovation, supported by favorable economics, signals a long-term the fourth factor is government policy. Is there a policy push that supports the sector you've identified? Again, using renewable energy as an example—the government has been highly supportive. They've offered incentives, promoted rooftop solar panel installations, and enabled benefits like feeding excess power back into the grid. All these are signs that government policy is aligned with innovation and capital flow. ADVERTISEMENT So, in summary: watch where the capital is moving, understand consumer behavior, observe technological shifts, and track government policy. All in all, you just need to keep your eyes and ears open to what's happening around you. Kshitij Anand: Well, for Gen Z, it's not just about what new movie is releasing on Friday, but also about tapping into what's happening in the government's space, which will ultimately dictate the sectors that will create wealth for you in the coming years. Now, let me quickly move on to a slightly nerdy question, if I may say so. How do you separate a short-term buzz—more like a cyclical tailwind—from a long-term boom, which is more of a secular trend? Because, let's face it, both can look shiny at first. For example, EVs seem more popular, more trendy—it feels cool to be driving around with a green number plate. What are your thoughts on that? ADVERTISEMENT Aniruddha Sarkar: No, absolutely. In fact, you've rightly mentioned it. In the initial days—or I would say in the first few months—it's very difficult to differentiate between what's a cyclical trend and what's a structural change. Initially, everything looks like a big shift. But only after a couple of quarters do you realise that it was more of a cyclical change than a structural I would say there are four to five key parameters that help you figure out whether something is long-lasting or just short-term. The first factor is time horizon and consistency. Typically, cyclical trends pick up during economic booms and fade during recessions. A good example would be infrastructure, cement, or metal consumption. These are typically cyclical. At the peak of an economic cycle, demand for cement and metals goes through the roof. And honestly, it's very hard to time the metal or cement cycles—but that's just how cyclical patterns the other hand, a secular trend continues across multiple business cycles. Something that picks up during the good times continues to perform even during downturns, and then builds further during the next upcycle. That consistency is the key second factor is the source of growth. Typically, cyclical upmoves begin with government stimulus—like what we often see in China. Whenever China announces an economic stimulus, metal stocks and the real estate market there suddenly boom. And as soon as the stimulus fades, everything comes back down. Kshitij Anand: Something similar to what we saw with the PLI schemes, perhaps? Aniruddha Sarkar: Absolutely. The PLI schemes were introduced across 14 industries, but structural upmoves happened only in a few. All 14 didn't show significant long-term impact. So yes, some benefited structurally, while others saw only a cyclical boost. As I mentioned, if the growth is driven by external factors like policy stimulus, it's usually cyclical. But if it stems from deeper changes like innovation or consumer behaviour, it's more likely to be third difference I observe between cyclical and secular trends is in valuation and fundamentals. In a cyclical upmove, stocks go from being cheap to expensive in a matter of six months. But in a secular trend, this journey takes much longer—and once valuations peak, they tend to sustain at higher levels for longer rather than correcting quickly. That's a clear behavioural last big difference is in what companies do with their capital. In a cyclical upcycle, companies often don't know what to do with excess capital. So, they return it to shareholders through buybacks, dividends, or bonuses. In contrast, in a secular trend, companies invest that free cash flow into growth. That's a powerful signal.A good example is the IT sector. During the earlier secular boom, companies were investing in themselves—setting up campuses, expanding globally. Today, the same companies are paying out large dividends, doing buybacks, and bonuses—which suggests they aren't finding enough avenues to deploy capital productively. That's another strong indicator for distinguishing between a cyclical and a secular uptrend. Kshitij Anand: My next question is quite literal—zero to hero, you could say. We've seen sectors like PSU, defence, power, and real estate go from being boring to becoming market darlings within a matter of months. What are the early signs that a sector turnaround is for real, and not just hype? Aniruddha Sarkar: You've nailed the sector names. In fact, I remember just 24 to 36 months ago, when I had launched one of my AIFs, these exact sectors—PSU, defence, power, energy, real estate—had a significant chunk of my portfolio allocation. I had a tough time explaining to investors why these sectors deserved now, the same investors are the ones telling me why these sectors are worth looking at. That shift in perception itself says a lot… Kshitij Anand: The story has turned around. Aniruddha Sarkar: Absolutely. So, this kind of answers your question about the types of sectors or signals that tell you which sectors to look at and bet on. I would say PSUs, in general—within PSUs, you have multiple categories: PSU banks, defence stocks, energy I put it differently, what gave me an indicator—and this goes back to those days—was that, in banks, all the operating metrics of those coming out of the NPA cycle were improving. We had SBI and other PSU banks quoting at 0.4–0.5 times price-to-book. Their ROEs and ROAs were either in low single digits or even in the negative if you're coming out of an NPA cycle and you've already done your provisions, then the question is—what could be worse? That was the bottom. From there on, the numbers only improved. So, when it comes to PSU banks, improvement in operating metrics was the first PSUs related to defence, the big boost came post the Ukraine war. When the war started in February–March 2022, the world woke up to the need for strong defence. Thankfully, post-COVID, India was already moving towards Atmanirbhar Bharat and Make in India. The government realised that we couldn't depend on others for defence needs. That's when defence became a major focus—modernising and indigenising our defence equipment. That marked a key shift for PSU defence third big sector within PSUs is power and energy. If India is to grow at a 6%+ GDP rate for the next 10 years, we must have adequate power supply. And power, unfortunately, cannot be imported—not at scale, at least. Yes, to some extent, we can import from neighbouring countries, but even they depend on us. So, importing power isn't really an option. Hence, the government push for capex in the power sector these were the big triggers for identifying PSUs—particularly PSU banks, defence, power, and energy—as sectors that were coming out of the woods. It was time to bet on them. Kshitij Anand: If I can just ask you to dig into your memory vault—could you share one investment where you spotted a sector early and it played out beautifully for you? What gave you that conviction? Any bullet points you'd like to highlight? Aniruddha Sarkar: I'll give an example from a completely different industry—since we've been talking about PSUs, power, and defence. This example will help investors understand that sectoral upcycles can happen in any early trend we identified, which worked well for our investors, was the capital markets theme. If you're betting on more and more household savings moving into equities, then the question becomes: who are the biggest beneficiaries of that shift?We broke it down: the key participants in the capital market are—ExchangesBrokeragesWealth management firmsAsset management companies (AMCs)Intermediaries like KFintech, CAMS, and CDSLThese are the only five categories that provide exposure to the Indian equity market. So, are they all going to benefit? When we dug deeper, we found that all five subsectors were poised for exponential took early exposure to exchanges, and we've all seen how listed exchanges have performed over the last couple of years. We also invested in asset management companies, based on the premise that mutual fund folios and assets would grow both organically and inorganically. AMCs benefit from operating leverage—managing ₹50,000 crore today versus ₹5 lakh crore tomorrow doesn't require a 10x increase in staff. That's where margins expand. Third, we invested in wealth management firms. With more affluent Indians, the demand for professional wealth management is only increasing. And finally, we took positions in intermediaries like CAMS, KFintech, and CDSL—natural beneficiaries of rising folios in mutual funds, AIFs, and PMS products. This is a classic example of identifying a big sectoral shift, recognising its key beneficiaries, and then zooming in further to pick the strongest players within each category. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
