In an exclusive interview with Moneycontrol, Anand Shah, head of PMS and AIF at ICICI Prudential, shared his perspective on the current bubble and alpha territory in the markets. Shah expressed that the market has improved significantly, with the early bubble territory of quality stocks at any price now experiencing a correction.
He emphasized on the importance of investing in good quality businesses but at reasonable prices. According to Shah, his firm has been avoiding consumer-facing businesses and IT services as investment ideas for the past 18-24 months, a strategy that has yielded favorable results.
Regarding the expectations for future growth of new-age tech companies, Shah believed that the market's projections for decades to come were misplaced. He noted that there has been a correction in the expectations surrounding these companies.
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These businesses, while being new age and bringing innovative products and services to the table, faced overly high expectations. Shah highlighted the importance of these companies now focusing on profitability. “We have seen correction in that segment of the market and that’s very healthy. Those businesses are coming around and saying that, look, we also have to make money from a point where they were not expecting to make money and still commanding high valuations. To that extent, there has been some semblance of sanity coming into these stocks correcting,” said Shah.
Shah also discussed the impact of China on the economy, stating that the whole economy has experienced a re-rating due to the evolving dynamics with China.
Previously, when China was exporting deflation, many manufacturing-related businesses struggled. However, as China now exports inflation, these businesses have begun to thrive, leading to stronger earnings growth and re-rating. Shah identified corporate banks, manufacturing, and manufacturing allied sectors as areas where attractive opportunities can be found, with robust earnings growth and appealing valuations, added Shah.
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