Value investing means buying what others avoid: Sankaran Naren

markets

Value investing is essentially about investing in asset classes that investors are avoiding rather than chasing those attracting the most money, said Sankaran Naren, Executive Director and Chief Investment Officer at ICICI Prudential AMC.

Speaking at an investor event, Naren explained that the core principle of value investing lies in going against the flow of capital. “Value investing is actually investing in the asset class which doesn’t get money. The opposite of value investing is investing in the asset class which is getting the most amount of money,” he said.

He noted that market history has repeatedly demonstrated this pattern. Periods such as 1999 to 2001 and 2007 to 2009 tested investors through high volatility, during which many believed value investing had lost relevance. However, when markets corrected, the strategy regained importance. “In 1999 people actually believed value investing was dead and then when 2001 came back, people realised that value investing was back,” he said.

According to Naren, a simple way to understand value investing is to observe where investor flows are concentrated. When large amounts of money enter a particular asset class or sector, it often signals that the opportunity may already be crowded. Conversely, asset classes that are being ignored by investors may offer better value opportunities.

He said investor behaviour often works in the opposite direction of value investing, with money typically entering markets near the top and exiting near the bottom. “Lot of money comes at the top and lot of money goes out at the bottom also,” he said. Because of this pattern, Naren said successful value investing requires the discipline to allocate capital to areas that may currently be unpopular with investors but could offer better long-term opportunities.

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