ICICI Prudential's quality-focused pitch for long-term gains
We believe the market is likely to remain volatile in the near term owing to various uncertainties in the form of trade tariffs, potential US slowdown, geo-political tension to name a few.
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As markets tread cautiously in a world of stretched valuations and tempered earnings expectations, ICICI Prudential AMC is turning the spotlight back on an old faithful—quality. In this edition of Fund Manager Talk, Ihab Dalwai, Senior Fund Manager, makes a case for why it's time to revisit this underappreciated theme as a long-term portfolio anchor.Edited excerpts from a chat:We believe the market is likely to remain volatile in the near term owing to various uncertainties in the form of trade tariffs, potential US slowdown, geo-political tension to name a few. On the domestic front, even though certain pockets in the market have seen sizable corrections, valuations continue to remain above average. Also, going forward, earnings growth trajectory is likely to moderate. As a result, we believe the upside expectations should be calibrated in line with earnings growth.In a year where earnings surprises are mixed and macros are wobbling, what's your compass as a fund manager—valuation comfort, earnings resilience, or thematic plays?Reasonable valuation and earnings resilience is important. Moreover, scouting for ideas generally happens in underperformed, under owned segments of the market where expectation is muted.Quality as a theme has underperformed the broader market over the past four-five years. This indicates a lack of investor interest resulting in reasonable valuation, making it a good entry point if one adopts a long term investment philosophy. In the backdrop of the current global economic uncertainty, and moderate earnings growth expectation from corporate India, we believe this is an optimal time to consider the quality theme.Over the past few months, quality as a theme has gathered pace in terms of performance. But that should not deter investors from considering quality, especially long term investors, as this theme is just coming off from a 4-5-year underperformance phase.We believe there are quality names available across sectors and market capitalisations. From a portfolio construction perspective, we aim to reduce sector concentration. There will be active bottom up stock picking within the mid and small cap space. Over time, our sector preferences will be reflective in our portfolio positioning.We believe quality based offering is an all-weather fund, especially at a time when this style is coming off after a period of underperformance. Generally, if one invests in high quality companies with robust management which can allocate capital well, the earnings tend to compound for a long period. Hence this strategy can be looked at for long term investments.Generally, when it comes to quality investing , the consensus or non-consensus view is not on earnings growth but on sustainability and durability of moat which is helping the company earn its high ROE. A large part of the return in quality investing is generated when the market believes that the moat believed in is not sustainable while the investee company is able to earn high ROE for an extended period and is also able to reinvest for growth.Historically, quality as a strategy has worked well for even those investors who are not very aggressive on the risk spectrum as the risk adjusted return for quality has been superior to the broader market and most other styles of investing. Hence if an investor is looking for a fully invested equity scheme to allocate to, then they may consider this quality based offering.
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Economic Times
a day ago
- Economic Times
Pharma, traditional retail 2 contra bets for ICICI Prudential MF's Mittul Kalawadia
Agencies For instance, if rates fall sharply, equities become relatively more attractive even at the same valuation. ICICI Prudential's hybrid Equity and Debt Fund is leaning into contrarian plays like pharma and traditional retail, betting on sectoral tailwinds and capital discipline amid macro uncertainty. Mittul Kalawadia, Senior Fund Manager, says the strategy is to rotate across market caps, manage allocations dynamically, and focus on overlooked pockets where fundamentals are intact but sentiment has soured. Edited excerpts from a chat with Mittul Kalawadia, Senior Fund Manager, ICICI Prudential AMC: Your Equity & Debt Fund has outperformed benchmarks across various market phases. What strategy are you following currently? Our approach involves dynamically managing equity-debt allocation and rotating across market caps based on relative attractiveness. Over the past year, we reduced exposure to mid- and small-caps, and added them selectively when markets corrected. Today, the approach is largely stock-specific as there is no strong directional call on increasing mid and smallcap names. We follow a bottom-up, contrarian approach, seeking opportunities in sectors going through downcycles or ones which are overlooked by the market. For instance, we see merit in companies with strong balance sheets and cash flows, especially amidst macro volatility. Can you give an example of this contrarian approach? Pharma is a good example. There is concern that US regulatory pressure will hurt Indian exporters, but many of them are not earning outsized returns. If price controls are imposed, companies will likely exit low-margin products. Supply will fall, prices will recover, and stronger players will benefit. Similarly, in quick commerce, capital is drying up. We expect traditional players to regain ground once aggressive discounting fades. These are both contrarian plays we like. Your equity allocation was around 70% recently. How has that changed since last year? At the peak last year, equity allocation dropped to about 65% as markets kept rising. When markets corrected early this year, we increased equity allocation to 72–75%. The allocation to equity is dynamically managed based on market movements and valuations. Who is this fund suitable for? Is it ideal for volatile periods like now? We believe the offering is best suited for long-term investors who are looking for equity-like returns but with lower volatility. Historically, hybrid funds benefit from market volatility—allowing us to buy low and sell high. Our fund, launched in 1998, has outperformed Nifty 50 TRI over the long term, thanks to this flexibility. Investors who do not require short-term liquidity, particularly younger savers, can consider this as a core holding. And when investors redeem, does the fund typically sell debt or equity? It depends on the market. If valuations are attractive, we prefer letting redemptions reduce the debt portion to allow equity exposure to rise naturally. Otherwise, we may sell both. But we usually maintain enough cash to manage redemptions without disruption. What's the range your equity allocation has historically moved in? Since the fund qualifies for equity taxation, we maintain at least 65% in equity. The upper limit is 80%. Post-COVID, we did touch that ceiling once. Last year, during market highs, we dropped close to the lower end—around 66.5%. What's your outlook on PSUs, given the recent volatility and events like Operation Sindoor? PSUs tend to be high-beta and get painted with a broad brush during volatile markets. Select segments like power can do well depending on the cycle, but overall, we are more stock-specific now. In 2022, we had high PSU exposure in our equity-debt and dividend yield funds, but we have trimmed the exposure since then. Though valuations have normalized, the blanket cheap PSU story does not hold anymore. Will the PSU rally come back? Unlikely, unless there is a significant bull market. On the dividend yield fund you manage—how has the strategy evolved given falling yields? Post-2020, we shifted away from opting for high yields due to their volatility. We now focus on moderate-yielding stocks with growth visibility. Sectors like IT, telecom (post-consolidation), and select pharma names fit that bill. This approach is a blend of value and growth. The goal is to deliver sustainable yields with more consistent investor experience. How do you define 'moderate yield'? It is not just dividend yield, we also look at cash flow yields. For instance, telecom three years ago was attractive as cash flows were poised to improve. Similarly, in IT, even 2–3% dividend yield coupled with steady growth can result in a 4–5% yield over time. Do you use yield as a valuation tool, especially when prices fall, say in large-cap IT? Yield becomes a valuation tool in case of high-cash-flow businesses. For example, if a company is likely to return 80–90% of its market cap as dividends over a decade, it is a great investment. We used this approach in metals in 2020. When cash flow yields were 20–25%, we invested. As steel prices peaked in 2021–22, we exited as we believed the yields were no longer sustainable, even though yields were still 6–8% at that time. What's your typical stock holding period in the dividend fund? It varies. Some stocks stay longer, while others are more tactical. Since we focus on relative attractiveness, we churn more than in a typical buy-and-hold strategy. The sizing and scaling also change based on valuations. Do you hold REITs and InvITs in this fund? Yes. We started including REITs in the past two years, when equities looked expensive. REITs are largely yield plays with some capital appreciation, say 2-5% potential upside depending on the asset. What's your view on oil marketing companies (OMCs) now? We have reduced OMC exposure in our portfolio. While they looked attractive when crude was cheap, current concerns include policy uncertainty and large capex plans, which could depress ROEs in the foreseeable future. Unless crude stabilizes in a narrow range, it is hard to build conviction. Some mutual funds are holding 20–25% cash. What's your approach to cash management? In hybrid funds, we use internal models to guide cash deployment. In funds like the dividend yield one, we rarely take big cash calls, staying within a 0–10% range. Hybrid funds are where we tactically manage cash, based on market conditions. What is your current equity positioning in the equity-debt fund? We are closer to 70–73% equity now, which is at the higher end of our band. If macro indicators or rates change, our in-house allocation model aids in deciding on the allocation pattern. For instance, if rates fall sharply, equities become relatively more attractive even at the same valuation.
Time of India
a day ago
- Time of India
Pharma, traditional retail 2 contra bets for ICICI Prudential MF's Mittul Kalawadia
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads ICICI Prudential's hybrid Equity and Debt Fund is leaning into contrarian plays like pharma and traditional retail, betting on sectoral tailwinds and capital discipline amid macro uncertainty. Mittul Kalawadia , Senior Fund Manager, says the strategy is to rotate across market caps , manage allocations dynamically, and focus on overlooked pockets where fundamentals are intact but sentiment has excerpts from a chat with Mittul Kalawadia, Senior Fund Manager, ICICI Prudential AMC:Our approach involves dynamically managing equity-debt allocation and rotating across market caps based on relative attractiveness. Over the past year, we reduced exposure to mid- and small-caps, and added them selectively when markets corrected. Today, the approach is largely stock-specific as there is no strong directional call on increasing mid and smallcap follow a bottom-up, contrarian approach, seeking opportunities in sectors going through downcycles or ones which are overlooked by the market. For instance, we see merit in companies with strong balance sheets and cash flows, especially amidst macro is a good example. There is concern that US regulatory pressure will hurt Indian exporters, but many of them are not earning outsized returns. If price controls are imposed, companies will likely exit low-margin products. Supply will fall, prices will recover, and stronger players will benefit. Similarly, in quick commerce, capital is drying up. We expect traditional players to regain ground once aggressive discounting fades. These are both contrarian plays we the peak last year, equity allocation dropped to about 65% as markets kept rising. When markets corrected early this year, we increased equity allocation to 72–75%. The allocation to equity is dynamically managed based on market movements and believe the offering is best suited for long-term investors who are looking for equity-like returns but with lower volatility. Historically, hybrid funds benefit from market volatility—allowing us to buy low and sell high. Our fund, launched in 1998, has outperformed Nifty 50 TRI over the long term, thanks to this flexibility. Investors who do not require short-term liquidity, particularly younger savers, can consider this as a core depends on the market. If valuations are attractive, we prefer letting redemptions reduce the debt portion to allow equity exposure to rise naturally. Otherwise, we may sell both. But we usually maintain enough cash to manage redemptions without the fund qualifies for equity taxation, we maintain at least 65% in equity. The upper limit is 80%. Post-COVID, we did touch that ceiling once. Last year, during market highs, we dropped close to the lower end—around 66.5%.PSUs tend to be high-beta and get painted with a broad brush during volatile markets. Select segments like power can do well depending on the cycle, but overall, we are more stock-specific now. In 2022, we had high PSU exposure in our equity-debt and dividend yield funds, but we have trimmed the exposure since then. Though valuations have normalized, the blanket cheap PSU story does not hold unless there is a significant bull we shifted away from opting for high yields due to their volatility. We now focus on moderate-yielding stocks with growth visibility. Sectors like IT, telecom (post-consolidation), and select pharma names fit that bill. This approach is a blend of value and growth. The goal is to deliver sustainable yields with more consistent investor is not just dividend yield, we also look at cash flow yields. For instance, telecom three years ago was attractive as cash flows were poised to improve. Similarly, in IT, even 2–3% dividend yield coupled with steady growth can result in a 4–5% yield over becomes a valuation tool in case of high-cash-flow businesses. For example, if a company is likely to return 80–90% of its market cap as dividends over a decade, it is a great investment. We used this approach in metals in 2020. When cash flow yields were 20–25%, we invested. As steel prices peaked in 2021–22, we exited as we believed the yields were no longer sustainable, even though yields were still 6–8% at that varies. Some stocks stay longer, while others are more tactical. Since we focus on relative attractiveness, we churn more than in a typical buy-and-hold strategy. The sizing and scaling also change based on We started including REITs in the past two years, when equities looked expensive. REITs are largely yield plays with some capital appreciation, say 2-5% potential upside depending on the have reduced OMC exposure in our portfolio. While they looked attractive when crude was cheap, current concerns include policy uncertainty and large capex plans, which could depress ROEs in the foreseeable future. Unless crude stabilizes in a narrow range, it is hard to build hybrid funds, we use internal models to guide cash deployment. In funds like the dividend yield one, we rarely take big cash calls, staying within a 0–10% range. Hybrid funds are where we tactically manage cash, based on market are closer to 70–73% equity now, which is at the higher end of our band. If macro indicators or rates change, our in-house allocation model aids in deciding on the allocation pattern. For instance, if rates fall sharply, equities become relatively more attractive even at the same valuation.
Time of India
29-05-2025
- Time of India
ETMarkets PMS Talk: PIPE and Value strategies delivered 30–37% CAGR over 5 years - Anand Shah reveals growth drivers
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel Despite the evolving market landscape and bouts of volatility, disciplined investing continues to deliver. In this edition of ETMarkets PMS Talk, we speak with Anand Shah, Chief Investment Officer – PMS & AIF at ICICI Prudential AMC, whose PIPE and Value strategies have clocked an impressive 30–37% CAGR over the last five an exclusive conversation, Shah breaks down the core investment philosophies, highlights key growth drivers, and explains how bottom-up stock selection, valuation discipline, and a long-term mindset have been pivotal in delivering alpha and building investor trust. Edited Excerpts –A) The recent volatility in Indian equity markets is largely driven by a combination of global macro uncertainties and geopolitical it is important to view this in the context of a market that has delivered strong returns over the past few years with relatively fewer degree of consolidation was expected and, arguably, healthy. From a medium- to long-term perspective, we continue to be economic fundamentals remain strong, driven by robust domestic consumption , infrastructure push, and digital believe volatile times offer opportunities for long-term investors to build positions in fundamentally strong businesses at more reasonable valuations.A) The March 2025 quarter has offered a mixed earnings picture. On the positive side, sectors such as banking, capital goods, and consumer services have shown resilience, supported by improving credit growth, operational efficiencies, and healthy balance there have been disappointments too, particularly in pockets of the export and discretionary consumption space, where demand has been more are seeing more divergence in earnings this quarter. This underscores the need for selective, bottom-up investing and a stronger focus on valuation discipline in this environment.A) We remain structurally bullish on Indian equities. Despite near-term global headwinds, India offers a compelling long-term growth story supported by favorable demographics, formalization of the economy, digital adoption, and a strong investment cycle led by both public and private current valuations in some segments, especially in mid and small caps, are elevated compared to historical a diversified portfolio and a disciplined investment approach, will be key to navigating this cycle and generating sustainable wealth.A) We see strong earnings potential in capex-linked sectors over the next few years. Infrastructure, financials, and consumer services are particularly especially large banks, are set to benefit from economic expansion and improving credit demand. Consumer services are seeing tailwinds from rising disposable incomes and evolving consumption infrastructure continues to be a structural theme backed by government push and rising corporate these are not defensive in the traditional sense, their long-term fundamentals and policy support make them relatively more predictable in an otherwise uncertain environment.A) We have had an extended bull run since the pandemic, with very limited drawdowns until recently. A phase of moderation was should recalibrate their return expectations and focus on the fundamentals i.e. proper asset allocation, portfolio diversification, and staying invested through is inherent to equities, but it also presents opportunities.A) The PMS industry is evolving rapidly, driven by the growing need for bespoke investment solutions, rising HNI wealth, and greater awareness of differentiated strategies beyond traditional mutual investors seek alpha in an increasingly mature market, demand for disciplined, transparent, and well-researched portfolio strategies is is also enabling better portfolio access and reporting, while regulation is enhancing credibility with regards to differentiated offerings. All these factors are expected to propel the PMS industry forward meaningfully.A) At ICICI Prudential AMC, the PMS vertical operates like a boutique within an institution—offering niche, research-intensive strategies under the umbrella of institutional one of the top players in the Equity PMS Discretionary segment is a result of our consistent investment philosophy and the trust of our core investment approach is built around the BMV (Business, Management, Valuation) framework. We focus on quality businesses with capable managements and invest at reasonable valuations.A robust research team supports bottom-up stock selection, while our independent risk team ensures portfolio quality and process-driven approach, combined with a long-term wealth creation mindset, has helped us deliver superior outcomes for our investors, which in turn aids the growth of the PMS Prudential PMS' PIPE Strategy has delivered nearly 37% annualised returns over the past five years, while the Value Strategy has also compounded at around 30% CAGR.A) Over the past five years, both our PIPE and Value Strategies have delivered strong performance. This outperformance is rooted in our disciplined, bottom-up investment approach and a sharp focus on intrinsic PIPE Strategy has benefited from the broader re-rating in the mid- and small-cap segments. Our focus has been on identifying emerging leaders with strong economic moats, robust balance sheets, and credible management look for companies at inflection points where capital infusion can act as a catalyst for growth. Valuation comfort remains a non-negotiable criterion in our stock selection our Value Strategy is centered on investing in fundamentally strong businesses trading at a discount to their intrinsic prioritize companies with sustainable earnings profiles, sound capital allocation, and the potential for long-term these are businesses operating in cyclical or contrarian sectors, where patient capital can benefit from mean reversion and structural both these strategies, our commitment to rigorous research has allowed us to consistently identify and invest in resilient businesses with long-term wealth creation potential.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
