nilesh shah: We are bullish on pharma and manufacturing themes: Nilesh Shah


Nilesh Shah, MD, Kotak Mahindra AMC, in conversation with ET Now’s Nikunj Dalmia at the Times Network India Economic Conclave during a panel discussion on India’s premium among Emerging Markets .

Markets have not fallen apart alright. We have come down from the recent high but it is not that we are at the beginning of a bear market or everybody is feeling very nervous about it. Are you secretly surprised with the resilience of the Indian market?
Undoubtedly. The amount of money which domestic investors have invested in markets during this downturn is truly amazing. In March and April 2020, FPIs sold Rs 69,000 crore worth of equity and markets were down about 35% from 12,300 to 7,500. From October, they have sold Rs 1,50,000 crore plus, and markets are down only 10-11%. One, FPIs have become smarter from their experience in March and April 2020; and two, retail investors are showing tremendous maturity for the growth story of India and the credit goes to the media.

For the first time somebody is saying that the media has done a great job.
Now you are also saying that one does not have to talk about SIP. It is already sold to every investor and the job which you have done is popularising SIP to retail investors. That is also playing a great role in getting informed investors into the market.

Will the SIP investors be disappointed or will they be rewarded from here?
Every SIP investor had to go through agnipariksha (ordeal by fire) in March 2020. The agnipariksha was huge. Three years’ equity SIP returns were negative, five years’ equity SIP returns were lower than savings bank accounts and 10-year equity SIP returns were lower than bank fixed deposits. So having passed through that agnipariksha, today we are seeing double digit returns across three, five and seven and 10 years.

What about the India growth story?

I think overall India’s growth story is good and we want to invest in good companies at good prices. It is very easy to say and very difficult to execute. As of today, we are bullish on the pharma sector. We believe the undervaluation will come into play and earning as well as PE will get upgraded. We are bullish on industrial and capital goods along with PLI and China plus one – a combined manufacturing theme.

We believe what we have not seen in the past in terms of manufacturing capabilities, we should be able to see going forward.

Look at India’s mobile phone sector. We were importing about $8-10 billion in 2013-14-15. There were three factories making mobile phones and total domestic production was about Rs 22,000 crore. Fast forward to 2022, there are more than 200 factories making mobile phones. Domestic production value is up 12 times to Rs 2,20,000 crore. We are exporting mobiles worth about $5 billion. From being the twelfth largest mobile phone manufacturer, we have become the second largest mobile phone manufacturer. What happened in mobile phones will happen in many other sectors, courtesy PLI schemes, courtesy manufacturing becoming competitive and that will create this sector on a next probably multi-decade bull run.


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