MC EXCLUSIVE PPFAS’s Rajeev Thakkar: Shakeout needed for next leg up, sideways markets offer breather

Rajeev Thakkar, CIO, PPFAS MF

Stocks have moved sideways for more than a year, giving stock prices time to cool off and fundamentals to catch up, said Rajeev Thakkar, CIO of PPFAS Mutual Fund. While volatility has persisted, and stocks have corrected, the valuation premiums built into prices amid a hyper competitive landscape across several sectors poses a threat to further rise in equity values, he said in The Wealth Formula podcast with N Mahalakshmi.

Thakkar downplayed the overall macro impact of tariffs, noting that aside from labour-intensive sectors like textiles or gems and jewellry, GDP-level repercussions are limited. “Trade will find a way,” he said, adding that if the US sources less from India, other markets will open up and global sourcing patterns will rebalance. Extremely labour-intensive manufacturing, like textiles or phone assembly, is unlikely to shift to the US mainland even with tariffs, he argued. Thakkar expects eventual settlements in the 15–25% range.

On GST redesign, he said rationalisation would reduce complexity and litigation, but warned against expecting dramatic end-consumer price cuts. The benefits will be visible only in select segments where rates are sharply reduced, and where duty structure does not end up inverted.

When asked about trigger for a decisive market direction, he said, he doesn’t see any near-term trigger sparking a broad rally, though clarity on tariffs could help sentiment. Even with 20% tariffs, he expects movements to remain stock-specific rather than across the board.

Looking ahead, Thakkar said the key driver will be a “shakeout” across overcrowded sectors. "What is ailing the market is hyper-competitiveness,” he said, citing grocery retail, direct-to-consumer brands, paints, and FMCG private labels as examples where margins are under pressure. He recalled similar episodes in airlines and telecom, where profitability only returned after weaker players exited.

Currently, he sees similar dynamics in wealth management and discount broking, where aggressive expansion and VC-funded entrants are squeezing margins. A tougher funding environment may eventually force smaller players out, but Thakkar does not see any imminent large-scale exits. Banking, by contrast, remains stable with limited new entrants.

On positioning, Thakkar said PPFAS evaluates competition intensity, balance sheet quality, pricing power, and valuations before investing. The fund currently holds exposure in private sector banks, which he said offer stable competition and reasonable valuations, and has recently added a small position in telecom.

PPFAS continues to hold around 22% in cash, which Thakkar said could be deployed quickly if opportunities arise. The fund is willing to allocate up to 5% of corpus in a single company, meaning four strong ideas could absorb cash swiftly. He cited March 2020, when the fund cut cash from 12% to 2–3% in a single month, as an example of how fast deployment can happen in periods of market dislocation.

“We never know the proximate cause, but markets do what they do,” he said. “How soon we’ll be able to deploy depends on the opportunities that really come our way.”