PMS managers tweak strategies for 2025, say chase growth, avoid macro-sensitive sectors

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Portfolio Management Services (PMS) managers have refined their investment strategies as they step into the new year. A common theme among fund managers is a sharp focus on growth while exercising caution with valuations. Unlike last year, when even highly valued companies attracted significant attention, the sentiment has shifted. Managers now emphasise that even a quarter or two of underperformance could weigh heavily on a stock's performance.

Here is what different PMS managers say:

Rohan Mehta, CEO and portfolio manager
Over the last 25 years, the market has declined by more than 10% on 14 occasions, and this is now the 15th time it has happened. Historically, when the market drops more than 10%, the sectors that previously outperformed tend to reverse their performance. As a result, sectors like auto, capital goods, power, and solar are likely to face consolidation or downward trends in the coming year.

The three sectors in favour now are IT services and capital markets. This preference isn't solely due to the underperformance of past cycle leaders but also because IT has lagged for six to seven years. As growth cycles slow, the shift from total fixed expenditure to OPEX benefits companies with operational focus over those reliant on capital expenditures.

When selecting stocks, avoid companies with excessively high growth over the last two-to-three years that are trading at extreme valuations. If such companies experience even one quarter of underperformance, significant corrections are likely.

Amit Doshi, co-fund manager Care PMS
Our strategy will focus on assessing the management team’s quality and track record, growth potential, balance sheet, and if the company is reasonably valued. At the portfolio structure level, if the market corrects further in the small- and mid-cap space, we would consider shifting from the large-cap segment—currently a part of our portfolio.

One concern is the way IPO valuations are being driven by demand-supply dynamics, such as how many times an IPO is subscribed, rather than the fundamental value of the company. If IPO valuations continue to be influenced by these factors, it’s something we would consider a red flag.

Aniruddha Sarkar, CIO and Portfolio Manager at Quest Investment Advisors
The investment strategy should prioritise earnings growth while maintaining valuation comfort. The focus should shift toward sectors benefiting from favorable tailwinds while avoiding those vulnerable to headwinds from policy changes or macroeconomic factors. In terms of market capitalisation, a balanced allocation is essential: 40% in large-cap stocks for stability, 40% in small-cap stocks for their high earnings growth potential, and the remainder in mid-cap stocks and cash for diversification and liquidity.

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