Latest news with #NileshShah
Economic Times
3 days ago
- Business
- Economic Times
Volatility ahead, but long-term investors can sleep through it: Nilesh Shah
"Indian equity markets are going up because compared to other emerging markets, we look far better. Our earnings growth over next three-five years is likely to be in high single digit, low double digit. So, my recommendation is that if you are taking a longer-term view, then yes, there is no need to worry about this volatility. There will be nightmares. But if you sleep throughout, then you will have a happy ending, you will have a happy sleep," says Nilesh Shah, MD, Kotak AMC. ADVERTISEMENT We are talking to you at a time when you look here, look there, look down, look up, everything seems to be at an all-time high. Gold, silver, US equities, Indian equities, NAV of Kotak Mutual Funds, everything is at an all-time high. Nilesh Shah: Yes, we are in a Goldilocks scenario where courtesy central banks printing money over the years have created a scenario where all asset classes are nearly all-time high. They say too much of good news and too much of happy days do not last for long. So, is this like a dream and we would be shaking up or this is going to be long dream which will keep us happy for next few years. Nilesh Shah: So, difficult to say in a very uncertain geopolitical environment. If we see all around us, events are happening at a pace and a scale which is very-very difficult to figure out. There is no way we can position our portfolio for every global event happening. If we take a longer-term view, the drivers for different asset classes are totally different. Gold is going up because central banks are buying gold to diversify their dollar reserves. Indian equity markets are going up because compared to other emerging markets, we look far better. Our earnings growth over next three-five years is likely to be in high single digit, low double digit. So, my recommendation is that if you are taking a longer-term view, then yes, there is no need to worry about this volatility. There will be nightmares. But if you sleep throughout, then you will have a happy ending, you will have a happy sleep. Absolutely and I guess one does not have to wait too long for the first litmus test, at least the earnings are soon going to be knocking on the corners. But where is it that you are anticipating pockets of outperformance this earning season and where do you think underperformance is going to persist? Nilesh Shah: So, purely from expectation point of view, we believe some of the midcap IT companies will be able to outperform expectations. Now, please do not confuse numbers with the expectation. If a bad number is factored in and you deliver better than that, it will still be outperformance. Consumer discretionary, consumer durable is one space where we could see against earnings beating expectations. ADVERTISEMENT Banking and financial services on a selective basis we should see earnings beating expectations. The disappointment probably is going to happen more on a stock specific thing rather than sector specific thing. Albeit real estate seems to be slowing down. The top end of the real estate is still continuing, but the mid and bottom end seems to be slowing down. So, there could be some earnings disappointment over there. Correlated to that sectors which are very-very competitive, for example, paints there could be earnings disappointment. ADVERTISEMENT Commodities on a higher base may deliver slightly lower than expected earnings. So, it is not likely to be large outperformance, large underperformance. It is likely to be rangebound earnings. But earnings is one key thing that the markets will be watching out for, but other than that 9th of July that is the deadline for the tariff that Donald Trump has set and everybody is watching out for that. Give us some sense that how do you see the markets approaching this particular deadline because it is not just the Indian markets that are doing well, but US markets they also sitting at an all-time high levels. Do you believe that some nervousness can kick in as we approach that date? Nilesh Shah: So, it is very difficult to figure out what Mr Trump is up to. Don ko samajhna mushkil hi nahin, namumkin bhi hai. And markets by now would have surrendered, will rather wait for announcements and then react, then actually start expecting and then reacting. In some sense, baagh aaya, baagh aaya story is getting repeated. Time and again the backtracking of announcements, backtracking of steps announced is probably convincing markets that it is better to react once steps are announced rather than in anticipation of the same. ADVERTISEMENT But also just wanted to have your take on back home. When it comes to the Indian markets, you have given your take on IT as well as BFSI. But what about some of the other sectors wherein because of this whole tariff chatter, some of the export related sectors, be it speciality chemicals, pharma, these were actually beaten down names back then. Do you believe now is the time to once again look forward to those counters, any valuation comfort wherein you find in some of these export related sectors. Nilesh Shah: So, I believe both chemical and pharma are sector to accumulate. On the chemical side, we had capacities and we had capabilities. The Chinese competition was hurting our margin and which is why operating leverage went against chemical sector. Now with tariffs, China plus one coming into play, our chemical companies' capacity utilization is going up. Operating leverage is coming back and suddenly they are able to deliver better than expected result. We saw that in March 25 quarter. We expect that to continue in June 25 and onwards quarter. In terms of pharma, Indian generic pharma provides about 40% of generic drugs consumed by Americans and that cost them about 10% of their medical budget. So, undoubtedly, it is a very-very cheap provision. We have seen that in some of the critical generic medicines, stock levels are running low and clearly US would not like to disturb that equilibrium. ADVERTISEMENT More importantly on this generic medicines because there is oligopoly in US distribution, a large portion of profit is kept by the distributors rather than the manufacturers. Even if there will be levy of tariff which we believe is not the front case, the distribution margin will be hurt far more than the manufacturing margin. Overall, we still believe Indian pharma companies is an opportunity to accumulate just like chemical sector.
Time of India
3 days ago
- Business
- Time of India
Volatility ahead, but long-term investors can sleep through it: Nilesh Shah
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads "Indian equity markets are going up because compared to other emerging markets, we look far better. Our earnings growth over next three-five years is likely to be in high single digit, low double digit. So, my recommendation is that if you are taking a longer-term view, then yes, there is no need to worry about this volatility . There will be nightmares. But if you sleep throughout, then you will have a happy ending, you will have a happy sleep," says Nilesh Shah , MD, Kotak we are in a Goldilocks scenario where courtesy central banks printing money over the years have created a scenario where all asset classes are nearly all-time difficult to say in a very uncertain geopolitical environment. If we see all around us, events are happening at a pace and a scale which is very-very difficult to figure out. There is no way we can position our portfolio for every global event happening. If we take a longer-term view, the drivers for different asset classes are totally different. Gold is going up because central banks are buying gold to diversify their dollar equity markets are going up because compared to other emerging markets, we look far better. Our earnings growth over next three-five years is likely to be in high single digit, low double digit. So, my recommendation is that if you are taking a longer-term view, then yes, there is no need to worry about this volatility. There will be nightmares. But if you sleep throughout, then you will have a happy ending, you will have a happy purely from expectation point of view, we believe some of the midcap IT companies will be able to outperform expectations. Now, please do not confuse numbers with the expectation. If a bad number is factored in and you deliver better than that, it will still be outperformance. Consumer discretionary, consumer durable is one space where we could see against earnings beating and financial services on a selective basis we should see earnings beating expectations. The disappointment probably is going to happen more on a stock specific thing rather than sector specific real estate seems to be slowing down. The top end of the real estate is still continuing, but the mid and bottom end seems to be slowing down. So, there could be some earnings disappointment over there. Correlated to that sectors which are very-very competitive, for example, paints there could be earnings on a higher base may deliver slightly lower than expected earnings. So, it is not likely to be large outperformance, large underperformance. It is likely to be rangebound it is very difficult to figure out what Mr Trump is up to. Don ko samajhna mushkil hi nahin, namumkin bhi hai. And markets by now would have surrendered, will rather wait for announcements and then react, then actually start expecting and then reacting. In some sense, baagh aaya, baagh aaya story is getting repeated. Time and again the backtracking of announcements, backtracking of steps announced is probably convincing markets that it is better to react once steps are announced rather than in anticipation of the I believe both chemical and pharma are sector to accumulate. On the chemical side, we had capacities and we had capabilities. The Chinese competition was hurting our margin and which is why operating leverage went against chemical sector. Now with tariffs, China plus one coming into play, our chemical companies' capacity utilization is going up. Operating leverage is coming back and suddenly they are able to deliver better than expected result. We saw that in March 25 expect that to continue in June 25 and onwards quarter. In terms of pharma, Indian generic pharma provides about 40% of generic drugs consumed by Americans and that cost them about 10% of their medical budget. So, undoubtedly, it is a very-very cheap provision. We have seen that in some of the critical generic medicines, stock levels are running low and clearly US would not like to disturb that importantly on this generic medicines because there is oligopoly in US distribution, a large portion of profit is kept by the distributors rather than the manufacturers. Even if there will be levy of tariff which we believe is not the front case, the distribution margin will be hurt far more than the manufacturing margin. Overall, we still believe Indian pharma companies is an opportunity to accumulate just like chemical sector.
Time of India
3 days ago
- Business
- Time of India
Stick to large-caps, disciplined asset allocation: 4 top mutual fund managers reveal how investors can navigate on-going stock market volatility, global uncertainty
Sankaran Naren,ED & CIO, ICICI Prudential AMC Academy Empower your mind, elevate your skills Nilesh Shah,MD, Kotak Mahindra AMC Nimesh Chandan,CIO, Bajaj Finserv AMC Chirag Mehta,CIO, Quantum AMC India is not at the epicentre of the current geopolitical tensions, so the direct impact has been relatively limited. Of course, if tensions were to spike significantly—particularly if crude oil prices were to surge—it could have a negative effect on our markets. So far, we have seen crude prices spike and then cool off. Our overall investment framework over the past 20 months has focused around diversification and asset allocation. This has worked well in volatile market conditions, and we haven't found the need to change our basic core are currently in a moderate return environment across asset classes. Initially, we thought that gold and silver had significant return potential—and they have delivered strong returns. But looking ahead, we find it difficult to identify any one asset class that could deliver outsized returns. Even Indian equities, which did outperform earlier, are now delivering more moderate returns, in line with our expectations from a couple of years ago. At present, it is challenging to pinpoint any one asset class with big return potential in the near is the time to take a balanced approach. Instead of concentrating only on high-risk areas, investors should consider large-cap or flexi-cap strategies, and maintain a sound asset allocation plan. Expectations also need to be realigned— from the high returns seen between 2020 and 2024, to more moderate returns going forward. That's why we are strong proponents of hybrid strategies and also believe in SIP investing in flexi- and large-cap oriented tensions add volatility , but many stocks offer a margin of safety via strong growth and reasonable valuations. Ignore the noise and focus on the fundamentals. There are events happening in geopolitics at a rapid pace and accelerated scale which are unpredictable. There is no way we can position our portfolio for every global event. We can only respond to such an event. Our focus is on long term outlook. We focus on building portfolios of companies which are growing faster and which are available on reasonable conviction in consumer discretionary, driven by tax rebates, lower EMI burdens, and the Eighth Pay Commission . Also, we are favouring stocks which can deliver above-expectation growth at reasonable to disciplined asset allocation: buy cheap, sell expensive. At the current stage, we prefer large-cap equities at fair value, Gilts with over 7% yield for carry or performing credit AIFs, and gold in precious metal. More importantly we expect moderate returns in all asset classes over two to three things stand today, we are not worried about any significant negative impact of the Middle-east tensions on India. The Brent Crude price, which may impact inflation and input prices for some companies, has corrected. As far as positioning is concerned, even before these events, we have been positive and overweight on domestic sectors. So we continue with the top down research starts with identifying mega trends that can impact economies, businesses and companies. We look for opportunities where the valuations have not completely discounted a particular mega trend, and we look to invest in those areas. If there is a significantly large theme which is positively impacted by mega trends, we launch a separate fund for the same. Currently, we have only two such funds: Consumption and Healthcare Sector wise we are positive on BFSI, Consumption, Industrials and Healthcare . We are bullish on Indian equity market and believe that Indian markets provide a strong case for growth and diversification to global investors. There is a diverse pool of sectors contributing to the overall profit pool thereby reducing earnings volatility. Valuations have corrected in the last one year and many pockets are attractively is a good diversification in investment portfolios. However, after a sharp run up in the last two years, a near term correction in prices cannot be ruled out. Typically, when global uncertainty reduces, demand for safe havens like gold also geopolitical events have remained region-specific or short-lived, with limited impact on India's markets. Two key metrics to watch out for are the rising crude oil prices and defence spending, which could divert funds from growth and social initiatives. Unless there's a significant rise in either, India's growth trajectory is unlikely to be are generally the flavour of the season, but India's core structural theme lies in its potential for 6.5–7% real GDP growth. This translates into rising per capita income and evolving consumption patterns that significantly benefit underpenetrated sectors. Broadly, India's long-term secular themes revolve around domestic consumption, infrastructure, and market remains one of the few where economic growth translates into strong returns. As a result, it trades at a premium to peer emerging markets. However, following some price and time correction, valuations have moderated—large caps are now near long-term averages, while mid- and small-caps still appear expensive. Our strongest convictions lie in BFSI, consumer discretionary (such as autos), and the current geopolitical uncertainty, gold remains a vital portfolio diversifier. Rising deficits and unsustainable debt—likely to worsen under Trump's policies like the 'one big beautiful bill'—are eroding confidence in the US economy. This could weaken the dollar and support gold prices.
Economic Times
24-06-2025
- Business
- Economic Times
GST 2.0 and infra push could power India's next growth phase: Nilesh Shah
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Popular in Markets "You have seen the reaction to gold prices , to crude oil prices . All of this we seem to be getting into kind of an environment of moderate inflation , subdued inflation, that has traditionally always been a challenge or a pain for India. So, clearly, honestly from a sentiment point of view and the emerging macro fundamentals, this is a great situation to be in," says Nilesh Shah , MD & CEO, Envision Capital I do not know about the multibagger ideas, but yes, today's interaction could not have been on a better day that when truce has been announced, ceasefire has been announced. At least it puts to rest any of the kind of geopolitical issues or tensions which probably the market had, got reflected a bit of that yesterday but thankfully today we are back to pretty much like business as usual or back to normal. And it honestly augers very well for the market. It augers well for have seen the reaction to gold prices, to crude oil prices. All of this we seem to be getting into kind of an environment of moderate inflation, subdued inflation, that has traditionally always been a challenge or a pain for India. So, clearly, honestly from a sentiment point of view and the emerging macro fundamentals, this is a great situation to be yes, from a pure macro and especially external macros, probably a lot of good news is out there. It is more about now what we do in terms of our own internal policy measures, economic reforms, and I am not talking of the big bang reforms, but just a few things could pretty much further not just the sentiment but also further lift up the fundamentals and contribute to earnings growth, I clearly believe something that we really need to look forward to and watch out for in 2025 is clearly going to be the GST 2.0, I mean that is something which has been in the works in terms of enough of reports out there in the media that the government is looking to now take GST to the next level whether it is in terms of cut in tax rates or whether it is in terms of rationalising taxes or reducing tax slabs and ease of implementation, all of that, I clearly believe that that is something which is probably less spoken about, less appreciated but I actually believe that is going to be very-very powerful, so that is two is upping up the spend on infra. I mean, this financial year the spend on infra pack was kind of pretty much at 3% which was in line with what it was last financial year. But there is room for that to kind of go up. I clearly do not think we have seen any peak of spending on infrastructure, till we get to at least 5% to 6% of the GDP which itself is growing. So, I probably believe that in the next few years you will probably see infra spend probably double or maybe even go even higher than these are some of the things which will continue to be very-very big growth drivers. These are things which will basically encourage businesses to grow and expand. So, on the whole, yes, apart from the global macros, I also believe our own domestic macros, policy measures, there is still lot of room for many things to I do not think because ultimately… I mean, this is a space, especially the largecap it has basically just been growing in about single digit. I believe that for a growth market like India where we have so many other growth options, unless you are essentially hugging the benchmark or want just basically the basic kind of largecap market returns, honestly as a bottom-up investor you probably do not have a compelling reason to be in largecap might be a good place to hide when there is enough correction and these are anyway very capital efficient companies and strong on governance as well. But beyond that, there is really nothing significant to really look out for. So, even in good times they were growing in single digits. If the US economy were to get challenged, global economies were to get challenged, even trying to grow in high single digit could be a huge-huge challenge for the big IT course, pockets remain in the midcap, smallcap IT space where they are specialising in specific domains, those kind of opportunities can remain, but otherwise the big IT companies, the best is behind absolutely. I mean, that has clearly been one of the strongest growth bastions that India has in the consumption space. Clearly post covid over the last five years the whole wave of premiumisation has caught on to the alcobev space. Indian companies have been hugely successful in being able to launch brands which essentially have got well received by consumers and Indian alcobev companies are only increasing their relevance to an ever growing consumer base in India. So, I still think it is still early are still very early on in terms of matrices like our per capita consumption and individual players continue to be on the journey of premiumisation which is driving their realisations, revenues, margins, cash flows. So, I still believe that the sector itself, the category itself still has many-many years to go.
Economic Times
24-06-2025
- Business
- Economic Times
Big banks may struggle, but smaller credit plays set to outperform: Nilesh Shah
"These are some of the categories or sectors or individual companies which have done really well, especially in the recent months or in the last one years. So, we continue to be very-very positive. Financialization of savings, financialization of the economy is not just a multi-year kind of an opportunity, it is a multi-decadal opportunity and I believe it is one of the most strongest investment themes that India as a market has to offer to investors," says Nilesh Shah, MD & CEO, Envision Capital. ADVERTISEMENT But why is that category not doing well? Well, as a theme, it is logical. As an idea, it is safe. As a concept, these are good companies. But if one looks at even the grand old daddy if I may use the word United Spirits, it has not created wealth the way other stocks have created in last five years. Nilesh Shah: So, clearly, first is, within the entire consumer space, it is probably United Spirits maybe over the last three to five years and we own a few stocks in the space, so just a disclaimer including United Spirits. So, over the last three to five years clearly United Spirits has delivered reasonably good returns. It has delivered returns which are ahead of a lot the large consumer companies. So, to that extent, it has done pretty well, not too bad both in absolute terms and relative terms. But obviously the homegrown players like Radico Khaitan which we have been owning as well for a very long time, they have done exceptionally well. So, yes, and United Spirits itself has been going through a lot of rejig in terms of its business strategy, its portfolio, it has kind of shedded its portfolio, what we call as the popular segment, and is now substantially a premium kind of a segment. So, to that extent this itself has basically taken some time, it has taken a lot longer for the business to now stabilise itself. But clearly will it be able to grow substantially higher than the category? I do not think so because its base is so large, its market share is so large, so the big boys will find it or the big giants will find it very difficult to grow at a substantially higher pace. It is obviously the homegrown ones which are going to do relatively better. ADVERTISEMENT So, from a three-year standpoint, what is looking like a theme where whether it is a midcap idea associated with that theme or with that template, but you see earnings visibility of 15% to 20% on a CAGR basis. Nilesh Shah: Yes, absolutely. I mean, I think that has really been the segment where most of the tier II, tier III companies across sectors have been growing at that kind of pace whether we start with IT services or consumer or some of the cap goods companies, those are on a very broad basis companies are growing in high teens which is a great situation to be in in context of where the economy is growing at 6-7% in real terms, 10% to 11% in nominal terms and the earnings of the large companies or the Nifty companies are probably at best growing in high single digit or maybe low double digit or the early teens versus that clearly across sectors we see the next level of companies growing at significantly higher pace. So, that is a great kind of situation to be in. ADVERTISEMENT What about your view on financials? Last time you were very bullish on financials. They have seen quite the runup before geopolitical action took over. I remember, you being positive on IDFC First Bank as well. Does that conviction continue? Nilesh Shah: Yes, I think across the board financials, banks is a great place to be in. Of course, we all know that their balance sheet condition is amongst the best. We have not seen balance sheets which are as strong. Clearly, the growth continues to be there, especially for some of the smaller banks, some of the specialised credit plays and some of the other verticals within financial services which have been growing extremely well, be it online investment platforms or online insurance distribution platforms or online payment fintechs. These are some of the categories or sectors or individual companies which have done really well, especially in the recent months or in the last one years. So, we continue to be very-very positive. Financialization of savings, financialization of the economy is not just a multi-year kind of an opportunity, it is a multi-decadal opportunity and I believe it is one of the most strongest investment themes that India as a market has to offer to investors. ADVERTISEMENT So, what is a better idea, stick to let us say stock broking firms or buy AMCs or buy into intermediaries like NSE and CDSL or it is time to go back to banks? Nilesh Shah: It will have to be a combination of both. There is really no overlap. When we talk of banks, there are credit plays, banks of course will benefit as s long as we see the markets continue to be strong, that will continue to attract lots of capital. It is an easy place to deploy significant amount of capital for managers. So, to that extent the big banks will continue to kind of do relatively fine. But more importantly specialised credit plays will do very-very well. Clearly with falling interest rates, especially NBFCs, HFCs will continue to do very well. Smaller banks again have a strong possibility of outperforming, especially smaller banks which have built a critical mass. So, this as a pack will do very well. And on the other hand businesses which are linked to capital markets, businesses linked to online insurance distribution or payments as a space will kind of demonstrate growth rates beyond the 20-25%. So, I would still believe that a portfolio approach works better. A combination or a bouquet of high-quality franchises within the financial space will continue to deliver market beating returns. ADVERTISEMENT What about your holdings when it comes to the entire capital market theme. Angel One is a stock that you have been bullish on, but that stock has not done all that much YTD in the last six months. Do you continue to hold and other than that capital markets what is looking good right now? Nilesh Shah: It has probably actually done relatively well in the last three to four months after a selloff that it had witnessed about 12 months ago. Clearly, a lot of the sell-off was based on a lot of the measures that were taken to bring slightly more kind of calmness in the derivatives market and some of the other regulations which were introduced or policy tweaks which were introduced to ensure that capital markets become a more efficient and a more safer place for investors and traders. So, as a reaction to that, some of the capital market oriented companies did kind of get impacted. But we clearly believe all that is behind us. Valuations are still reasonable especially for the online investment platform. Just to talk about Angel One, yes, we continue to own it. We have been owning it for a long time and we intend to kind of keep owning it. Just to put things in perspective, very recently Groww got valued by private equity players at a significant premium to essentially what some of the other publicly listed online trading platforms are trading at. So, it just shows what long-term investors are looking at as far as this category goes, as far as this space goes. So, to that end, it continues to make sense to own some of the market beating leaders out there. (You can now subscribe to our ETMarkets WhatsApp channel)
