Fund managers sceptical of infra stocks opportunity because of past experience: Nilesh Shah

Kotak Mahindra AMC managing director Nilesh Shah in an interview with Moneycontrol on July 31, discussed the cautious approach of fund managers towards investing in the infrastructure sector, using a relatable analogy: "If you have been burned by drinking hot milk, even with a cold lassi, you will be cautious while drinking."

During the period of 2003-2008, the Indian stock market was heavily influenced by the infrastructure theme, and high growth expectations were built into stock prices. However, many companies in the infrastructure sector failed to deliver returns to shareholders.

When the market crashed following the global financial crisis, stock prices corrected sharply, and several companies couldn't recover due to high debt and poor governance. This historical poor performance is the main reason why fund managers are now hesitant to invest in the infrastructure segment.

Nilesh Shah highlighted the key lessons learned from the 2008 cycle. Leverage proved destructive for many good companies in the infrastructure sector, and corporate misgovernance also played a significant role in the downfall of infrastructure companies during that time.