ET Now: It has been a great year for wealth creation. Now, real estate, gold, and stocks are back in the picture. Broadly, India has seen a wealth effect of $10-12 trillion. With such a wealth effect, can consumption really remain down permanently?
Nilesh Shah: Absolutely not. In fact, consumption isn’t down. I think we’re focusing on one or two large listed companies and concluding that consumption is down, which isn’t entirely accurate. There’s a lot happening below the surface among individual companies. The challenge in today’s consumption space is disruption. Established players are being challenged by new entrants, leading to a tussle between incumbents and challengers. For example, companies like HUL and D-Mart might show modest growth because of competition from e-commerce and quick commerce players. When we look at their growth and add it up, I believe consumer demand is still growing. Consumption patterns are shifting—some categories are mature, while others are emerging. This growth is fueled by aspirational India, and as investors, we need to identify those emerging categories and opportunities.
ET Now: Within consumption, we see a clear distinction. After COVID, there was a K-shaped recovery—premium consumption and asset classes performed well. However, inflation and stagnant income growth have impacted the lower segments.
Nilesh Shah: That’s a valid concern and a potential risk to India’s broader growth. Job creation must accelerate, private capital expenditure needs to increase, and further reforms are needed to make India a more business-friendly environment. Broad-based job creation and rising wages will only happen when these areas progress. The biggest priority should be upskilling; without it, per capita incomes won’t rise.
ET Now: So, gold, silver, a snack stock, an alcohol company, a beauty brand, or just the Nifty—what’s your muhurat pick?
Nilesh Shah: For those who prefer a straightforward market call without deep stock research, Nifty is an excellent choice. Over time, Nifty has compounded returns significantly, delivering about 11-12%, which outpaces bank FDs. Besides Nifty, investors should look at strong companies within the index. If you can identify the top-performing five out of 50 Nifty stocks, you’re in a good position. Beyond Nifty, there’s a vast universe of stocks that can potentially offer even better returns.
ET Now: What are three stocks you’ve held for the past three years, three you bought in the last three months, and three you’ve exited recently?
Nilesh Shah: That’s a complex question! In the capital markets, we hold HDFC AMC and Angel One. We view this sector positively due to digitization and the shift from physical to financial investments. We’ve also recently invested in renewables—solar and wind EPC companies. As for exits, we generally don’t participate in IPOs immediately; we prefer to wait and assess.
ET Now: Do you still hold Hitachi and IDFC First Bank?
Nilesh Shah: Yes, we continue to hold both. Our long-term view on them remains unchanged.
ET Now: You’ve closely followed traditional IT services. What’s your outlook?
Nilesh Shah: Large IT companies, while still growing, have matured and are growing at about 3-4%. They aren’t growth plays but valuation arbitrage opportunities. The real interest lies in smaller companies that are helping enterprises adopt AI and big data analytics. These companies, often with market caps below ₹5,000 crore, have substantial growth potential.
ET Now: Financials seem to be a common investment theme this Diwali. Would you agree?
Nilesh Shah: Yes, financials are promising. We’re also interested in CDMO within pharma and the luxury real estate market. Financials, in particular, are still in a nascent stage of growth. While PSUs have had a strong run, they may consolidate for a while. That said, if valuations and market conditions align, they could still offer compelling opportunities.
ET Now: We’ve discussed many of your portfolio stocks. Any disclosures?
Nilesh Shah: Yes, assume we have vested interests in the companies discussed. Please conduct your own due diligence before investing.