Shah believes that financial services — including insurance, asset management, wealth management, and broking — continue to benefit from this long-running trend.
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Shah has been maintaining a balanced, bottom-up approach for almost a year now.
The portfolio, earlier overweight on manufacturing and corporate banks, has now broadened its focus. “We have upped our exposure to the consumer services businesses, while we remain underweight on fast-moving consumer goods (FMCG),” Shah said.
In sectors like paints and autos, Shah said the earlier dominance of a few players had boosted profitability and valuations. “India has practically had a duopoly – two or three players in each segment – and that worked very well for a decade,” he said. However, he added that new entrants have changed the landscape. “Having seen the entry of new players with strong balance sheets, there will be a time when there will still be muddling. Margins will take time to recover,” he explained.
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India, he says, faces a mix of global and domestic challenges. While the country has taken some fiscal and monetary steps, they may not be enough if global uncertainty continues.
He expects earnings growth to remain moderate, as corporate profit-to-GDP has already risen to around 4.7–4.8% from earlier lows. “There’s very little room to further squeeze more profit out of the same gross domestic product (GDP),” he said, adding that stronger nominal GDP growth would be needed to sustain earnings momentum.
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