ICICI Prudential AMC, which is awaiting regulatory clearance for a ₹10,000-crore offering (IPO), is betting big on the capex and consumption stories that are moving in tandem. Anand Shah, CIO – PMS and AIF Investments at the AMC manages Rs 63,807 crore as on March 31, 2025, tells Nesil Staney that Indian markets are still trading at a 9% premium to global indices. Excerpts:
What is the emerging Leaders concept?
Emerging Leaders is about identifying companies on the cusp of structural transformation. We look for scalable business models, clean governance, prudent capital allocation, and evidence of pricing power. The goal is to find businesses that may be a midcap today but have the ability to become tomorrow’s large caps. Early indicators include improving return ratios, consistent market share gains, and a track record of reinvesting cash flows constructively. We avoid momentum stories or valuation-driven bets as the emphasis is on durability of growth. The ability to grow without eroding return on capital is what separates the genuine future blue chips from trend favourites.
Which sectors, in your view, still have meaningful earnings tailwinds that the market might be underestimating?
The domestic economy is in a sweet spot where both capex and consumption are moving in tandem. Capex-linked sectors such as capital goods, infrastructure, and construction materials continue to see strong order books and improving operating leverage. Private and public capex together are set to breach Rs 30 trillion in FY26, which is a clear indicator of sustained investment momentum.
At the same time, consumption is poised for a structural boost, especially consumer services. The combination of GST rationalisation, soft inflation, and the upcoming 8th Central Pay Commission, which could inject nearly Rs 3.7 trillion (~1 % of GDP) into household income. This is expected to lift demand across discretionary categories.
Financials, especially large private and PSU banks, remain well-placed with clean balance sheets and steady credit growth. Telecom and energy are also seeing steady margin improvement. These segments are likely to offer the better visibility on earnings durability going into 2026.
With information access and research coverage far more democratised, how difficult is it to identify companies that will stand out over time?
Today, the real edge comes from how well one understands and interprets the data to make better investment decisions. We focus on earnings sustainability, management intent, and valuation discipline, the three pillars of our BMV (Business-Management- Valuation) framework. In addition, even in a well-researched market, there are mispriced opportunities in companies where short-term noise overshadows long-term value. India’s industrial and manufacturing revival is creating unique opportunities.
What are the risks, both global and domestic, that are underpriced today?
Rising sovereign debt, protectionist trade policies, and geopolitical flashpoints are potential sources of volatility. Any escalation could pressure commodities and disrupt supply chains, affecting input costs and inflation trajectories. Domestically, the biggest risk is valuation complacency. India’s PE still trades at a 9 % premium to global indices and a 61 % premium to emerging markets, both below long-term averages but still elevated. That means any earnings disappointment could trigger short-term corrections. While India remains among the few economies offering growth with macro stability, for investors this is a phase where discipline, diversification, and realistic return expectations matter more than ever.
Are there contra opportunities in the market now? If yes, which are the pockets?
We see value emerging in cyclicals such as industrials, metals, power, and select financials, areas that faced temporary headwinds earlier in the year but are now showing improving fundamentals. The pickup in liquidity, easing policy stance, and a revival in private capex are catalysts that could drive re-rating in these pockets. Similarly, within consumption, we see opportunity in select consumer services businesses like telecom, travel, organized retail etc, where long term growth might be better than investor expectations.
Could you explain the investment philosophy behind your PMS offerings?
SMART strategy is where both humans and machines are collaborating. Here we are using our quantitative factor research as well active BMV research capabilities in tandem. The SMART Strategy is designed as an all-weather portfolio, agile enough to participate across market cycles without being confined to one style or market-cap segment. It combines a mix of quantitative factor framework for elimination and BMV framework for shortlisting companies. It carries no permanent bias toward growth or value and balances opportunity with risk mitigation through disciplined diversification.
Your large-cap strategy has managed to consistently generate alpha. What has been the source of this outperformance?
We believe the outperformance of ICICI Prudential PMS Largecap Strategy is primarily driven by a disciplined investment approach that focuses on selecting a concentrated portfolio of large-cap companies with resilient earnings growth potential and reasonable valuations. The strategy emphasizes companies that are industry leaders with proven business models and effective management, that possess a competitive edge to sustain their market shares, backed by healthy balance sheets and cash flows. This approach helps generate consistent alpha over the long term by capitalizing on high-conviction opportunities within large-cap stocks, coupled with active sector allocation to capture market cycles and growth trends. Over past few years, our exposure to select names in the manufacturing and manufacturing allied space, along with names in consumption services has helped drive alpha.