Latest news with #PankajMurarka
Time of India
4 days ago
- Business
- Time of India
Post this earning season, Pankaj Murarka is avoiding these sectors. Here's why
Pankaj Murarka , CIO, Renaissance Investment Managers , believes India's equity market is overvalued, especially the top 20%, including defence and electronic manufacturing sectors. After a rewarding bull market, they've exited defence exposures due to unsustainably high earnings growth expectations priced into these stocks. The firm aims to reduce valuation risk in its portfolio at this mature stage of the economic cycle. You have always been a fan of tech and I am not saying IT. A lot of digital platforms are combining their might and strength with consumer facing industries. Anything that is interesting to you there? Pankaj Murarka: We own a lot of them like Paytm. I can continue to remain long-term constructive or positive on Paytm as a growth story. We like food delivery companies and now that industry is an oligopoly. Food delivery as a segment in a few years' time will have a billion dollars cash flow and an oligopoly where the top two players will control 120% of the profits because the other players will keep losing money and it will remain in an oligopoly structure forever. Quick commerce is very quickly getting into an oligopoly structure where three or four players will eventually dominate and control 120% of the industry profit because all the other players will keep bleeding. Productivity Tool Zero to Hero in Microsoft Excel: Complete Excel guide By Metla Sudha Sekhar View Program Finance Introduction to Technical Analysis & Candlestick Theory By Dinesh Nagpal View Program Finance Financial Literacy i e Lets Crack the Billionaire Code By CA Rahul Gupta View Program Digital Marketing Digital Marketing Masterclass by Neil Patel By Neil Patel View Program Finance Technical Analysis Demystified- A Complete Guide to Trading By Kunal Patel View Program Productivity Tool Excel Essentials to Expert: Your Complete Guide By Study at home View Program Artificial Intelligence AI For Business Professionals Batch 2 By Ansh Mehra View Program So, the good thing about this internet business is that apart from fast growth, they are driving industry consolidation in the segment in which they are operating at a very rapid scale. When there are a few players, it brings in pricing power and provides a long runway for the profit pool to keep growing and that is one thing unlike in traditional industries like steel or cement which have quite a few companies. Here there are just a few players in every segment and they will continue to dominate that space for a long period of time. The point I am making is each and every segment, or companies which emerge as leaders are the ones which we like because they will dominate the profit pool and they will have a long runway of cash flows over the next 15-20 years. If someone does not want to buy both and buy one only, Eternal or Swiggy, do you think valuation comfort is more with Swiggy and would you even pay Rs 300 for Eternal? Pankaj Murarka: Both, now it is every investor's call in terms of what they like and as they say valuation after a point of time is a matter of judgment because there are too many variables going into it. But if you ask me, over a period of five years, both of them will do well. Live Events You Might Also Like: Internet sector can grow at double or triple the nominal GDP growth rate: Pankaj Murarka The other pocket you were very bullish on is the banking space. We have talked about it in the past as well. But now, given the fact that we are in a rate cut environment and even the banking companies are talking about the NIMs compression going ahead, what is your view on the banking space right now? You continue to hold HDFC, Kotak, and ICICI Bank. Any other banks that look good to you or any of your recent additions? Pankaj Murarka: The view on banks remains positive. NIM compression is transitory and it is cyclical by nature. Whenever we will have rate cuts obviously, the way the sector regulations or RBI has regulated the sector, your assets get repriced much faster than your liabilities because your liabilities are long duration. So, this is a cyclical thing that in a rate cut environment banks will have some NIM compression and in a rising rate environment, they will get the benefit of expansion in NIM. I do not think that is something we should be concerned about. What we really like is banks with strong liability franchises and pristine asset quality and it is very clear now that the larger banks have an advantage over smaller banks. Clearly, we like the larger banks, and in fact, we own four of the top five large banks now in our portfolios including HDFC, ICICI, Kotak, and State Bank, and that primarily reflects our view. One thing which has been holding the sector back apart from the cyclical issues of NIM compression is slower loan growth and probably as the economy recovers in the second half of the year, probably we will see recovery in loan growth as well in banks. More importantly, in a market which is priced to perfection, there are a lot of sectors in the markets where valuations are far ahead of fundamentals, this is one sector where valuations are very reasonable. I still think that for an investor with a three-year time horizon, these large banks can give high teens returns or earnings growth because in an environment where credit will grow low double digit, these banks will take market share from smaller players, and they will go ahead of the industry credit growth. Effectively, they can do mid-teens credit growth and mid-teens to high-teens earnings growth and high teens returns in these banks over a medium-term time horizon. You Might Also Like: Jaiprakash Toshniwal sees value in 3 segments; goes contra on IT & specialized capital goods Post this earning season , are there pockets which you need to avoid or do away with from your current core list? Pankaj Murarka: Just to keep things in context, we need to understand that India is the most expensive equity market in the world and we are in the sixth year of a ferocious bull market. Obviously at the broad aggregate index level markets are priced to perfection and there are pockets of markets where obviously valuations are expensive or stocks are far ahead of fundamentals. What we have clearly done in our portfolio is we have taken the valuation risk out of our portfolio. Whichever segments of the markets where we think valuations are far ahead of fundamentals, we have taken money off the table. For instance, we have exited all our defence exposures. We are happy to take money off the table because in the last three-five years, it has been pretty rewarding owning some of these stocks. But now these stocks are pricing in a high 20s, 30s kind of earnings growth for these companies over the next 10 years. While there is earnings visibility in terms of the next two years, I am not sure in the next 10 years, these companies can do that kind of earnings growth and obviously there are a lot of expectations built into these sectors. I still doubt the long-term earnings growth can be sustained at what the market is pricing in. The top 20% of the market is most expensive and this includes defence and some of the other companies across electronic manufacturing. We have taken that out of our portfolio because we want our portfolios to be reasonably priced and at a mature stage of economic cycle and bull market, we do not want to carry valuation risk in our portfolios. You Might Also Like: Take it one day at a time; not very bullish or very bearish at this point in time: Mihir Vora
Time of India
4 days ago
- Business
- Time of India
Internet sector can grow at double or triple the nominal GDP growth rate: Pankaj Murarka
Pankaj Murarka , CIO, Renaissance Investment Managers , says tariffs may not significantly hinder the overall economy. While consumption will be insulated due to domestic focus, economic momentum is slowing post-Covid. Moderate growth and slower earnings are present. High growth exists in specific market areas. The internet sector shows 25-30% growth. Some internet companies can sustain growth at double or triple the nominal GDP growth . It has been a show of resilience for the past two days at least. It seems like all the negative was already done with. All through July, we have had a consistent FII selling. The index alone has lost about 900 odd points or so. Do you think the worst is behind us? Pankaj Murarka: For the time being, it looks like some of this bad news is in the price. Directionally, we are still very much in a bull market. I see any fall as a correction in the larger bull market. I still think that the index can do about 12-13% CAGR returns this year and probably over the next two to three years. Productivity Tool Zero to Hero in Microsoft Excel: Complete Excel guide By Metla Sudha Sekhar View Program Finance Introduction to Technical Analysis & Candlestick Theory By Dinesh Nagpal View Program Finance Financial Literacy i e Lets Crack the Billionaire Code By CA Rahul Gupta View Program Digital Marketing Digital Marketing Masterclass by Neil Patel By Neil Patel View Program Finance Technical Analysis Demystified- A Complete Guide to Trading By Kunal Patel View Program Productivity Tool Excel Essentials to Expert: Your Complete Guide By Study at home View Program Artificial Intelligence AI For Business Professionals Batch 2 By Ansh Mehra View Program In that context, probably first quarter numbers have been pretty much okay. The good thing is that we have arrested the earnings downgrade cycle and now incrementally earnings have stabilised. Hopefully from the second half of the year, we should see improvement in earnings going ahead. A fair bit of monetary and fiscal stimulus has been injected into the economy in the budget through tax cuts and then by RBI with a front loading of 50 basis points rate cut. Combining all of that, I am looking forward to a much better economy in the second half of the year and an uplift in earnings growth . I would think that the market should find a floor somewhere around these levels over the next few weeks. Coming to earnings, what is going to lead the recovery first and would it be more consumer facing sectors because they also are working with a low base? Pankaj Murarka: True, but before that let me just put the aggregate picture in play. Last year, we had probably one of the slowest earnings growth. In the last five years, post Covid at 5% for Nifty 50 index and the earnings growth for top 200 companies was not very different at about 7 odd percent. So, it was probably one of the slowest earnings growth in the last five years. While we will see some improvement in earnings this year, I must concede that earnings growth this year will not be very significant. If we can do a low double digit, around 10% growth on the Nifty index for Nifty index companies, that will not be a bad outcome. Probably next year is when we get into mid-teens kind of earnings growth. So, it will be a gradual recovery cycle both on the economy and earnings, and that is the one point I wanted to say. Live Events You Might Also Like: In healthcare, betting on these 4 segments; FMCG could be a tactical play: Mihir Vora Obviously, you are right that there is a skew in terms of earnings. I still think that financials are coming off a low base and given that the margins have been impacted in the first quarter and probably the first half because of the front load rate cuts by the RBI, in the second half of the year we probably would see earnings recovery in financials and so that should lead. I agree with you that we are probably coming out of almost two-and-a-half years of consumer slowdown, and so probably in the second half of the year, we should see an improvement in earnings trajectory for consumers as well. But the bigger concern is what happens with respect to the tariff and in this uncertain time, have you spotted any sectors which you believe will be insulated from the tariff tantrum? Pankaj Murarka : Yes, it is a pretty unwelcome move in terms of the tariffs that we will end up facing. But I still think that those are transitory and eventually these are all bargaining tactics. Eventually India and the US will have a deal in place. Now whether that happens in 8 weeks or 12 is anybody's guess. I still think that the long-term effective tariffs on India will be much lower than what it has been proposed. Having said that, tariffs will have some impact especially on highly export dependent sectors like textiles, gems and jewelleries and few others. On the aggregate growth basis, I still think the aggregate negative headwind that will emerge from tariffs for the economy is still moderate and manageable. Probably a 30-40 basis points hit on the aggregate GDP and despite tariff headwinds, India can still do a 6.2-6.3% growth this year which is similar to what we did last year at 6.5%. You Might Also Like: Jaiprakash Toshniwal sees value in 3 segments; goes contra on IT & specialized capital goods At the aggregate level, I still think tariffs are not a big headwind for the economy as a whole. Yes, consumption will be one of those pockets given that complete domestic orientation will remain insulated from it. All of us have to consider that there is a downward reset in terms of economic momentum from what we saw post Covid. So in an environment where economic growth is moderate and earnings have slowed down, high growth can be seen in some pockets of markets. My favourite sector is the internet sector and that is the sector where we are seeing growth still at 25-30% and many companies in that sector can sustain growth which can be 2x or 3x of the underlying nominal GDP growth. So, it probably remains one of my preferred places to find high growth companies in an economy and market where there is an earnings slowdown. You Might Also Like: Is 25% tariff on India the worst-case scenario? How long will it take markets to price that in? BlackRock's Gargi Chaudhuri answers
Economic Times
23-05-2025
- Business
- Economic Times
India in a mature bull market, still poised for positive returns: Pankaj Murarka
While our exposure is currently limited, we believe some of these platforms could emerge as the next generation of large-scale consumer companies. "Over the past five years, many of the low-hanging fruits have already been harvested. Significant money has been made, and valuations are now expensive. In fact, India is currently the most expensive market globally," says Pankaj Murarka, CIO, Renaissance Investment. Firstly, help us understand your outlook. What are you really pencilling in for the markets? Lately, a lot has been happening globally—we're in the midst of tariff uncertainty and its potential implications on businesses. However, back home, some macro indicators seem to be faring well. What's your sense of the Indian markets, and where do you see us heading from here? Pankaj Murarka: I've consistently maintained that we are in a bull market. My simple definition of a bull market, drawn from the original Dow Theory, is that markets deliver positive returns on a full-year basis. I still firmly believe markets will yield positive returns on an annualised basis. That said, I've also been highlighting that this is a mature bull market—we're now in the sixth year since it began, right around the onset of the COVID-driven lockdowns. Over the past five years, many of the low-hanging fruits have already been harvested. Significant money has been made, and valuations are now expensive. In fact, India is currently the most expensive market globally. We must also acknowledge that we're experiencing a cyclical slowdown—partly due to domestic factors and partly due to global trade headwinds. Yet, India is arguably the best-placed market in the world today. I still believe earnings growth will recover starting this year, with Nifty potentially delivering low double-digit earnings growth, and markets generating similar returns. So yes, our view on markets remains constructive. However, investors will need to be selective—picking the right sectors and stocks is crucial. At the index level, returns are likely to be in the high single digits to low double digits, which is still quite healthy for a mature bull market at this stage of the cycle. What are you doing with your internet stocks? Pankaj Murarka: To be honest, we've booked some profits. What began as a highly contrarian, fear-driven trade has now turned euphoric. Valuations in some of the companies we liked are now pricing in growth too far into the future. The key with internet stocks is the ability to identify strategic winners over the next 5–10 years. In my view, the top two or three players in any segment will generate 130–140% of the industry's profits—implying the rest will lose money. So, picking the right winner, and at the right valuation, is critical. For example, take Zomato in the food delivery space. At ₹50, we saw significant profit potential and felt the stock was mispriced. Today, it appears to be pricing in too much future growth. While Zomato remains a category leader and should do well over the medium term, I don't expect much near-term upside in its stock price over the next 12–18 months. Since we manage clients' money, our investment horizon is 2–3 years. Strategically, I remain very positive on the internet space, but yes, we have partially exited some positions. Assuming that earnings growth will be good—but not extraordinary—and that finding companies growing even at 15% might be tough, how would you build a portfolio for the next three years? Specifically, one comprising companies with 15–20% top-line and 15–25% bottom-line growth, but whose valuations aren't overly stretched. Pankaj Murarka: Absolutely. You've hit the nail on the head. While aggregate earnings growth is likely to remain in the low double digits, there are pockets across sectors where growth is stronger. The key is to find reasonably valued companies within those areas. Take EMS (electronics manufacturing services) companies—they're growing fast, but are already priced to perfection. Instead, I prefer slightly lower growth—mid to high teens—if valuations are more reasonable. What matters to investors is actual returns, and you can achieve strong returns even with moderate earnings growth if you enter at the right it comes down to business models and management execution. Companies with strong execution at a strategic level can deliver outlier growth despite headwinds. To answer your question, there are three broad buckets we like:First, large banks. We own the top four private sector banks in India. These stocks are trading at a discount to the Nifty and offer reasonable valuations. They are capable of delivering mid- to high-teens CAGR returns over the next three years. So, this remains a core portfolio consumer and consumer-oriented stocks. Over the last six months, we've pivoted towards this space. These stocks underperformed over the past five years, but valuations are now back in line with long-term averages. With a likely revival in consumption, we're focusing on companies driving both organic and inorganic growth—those with strategies to outperform industry internet companies. Despite some profit-taking, we still hold names in this space. Select internet companies can grow 25–30% CAGR over the next 5–7 years and are reasonably valued. So, they remain part of our portfolio. In summary, these three buckets should help generate high-teens portfolio-level returns—an excellent outcome in a market cycle like this, with moderate risk. Now that you've sketched the broader picture, let's fill in the details. Within those three buckets, what are your top holdings or ideas? Pankaj Murarka: Starting with large banks, we own HDFC Bank—we've re-entered after a gap of three years. Post-merger, the bank had a period of consolidation and was underperforming industry growth. Now, we expect it to regain industry-leading growth within the next four quarters. We also own Kotak Mahindra Bank, and ICICI Bank remains a core holding given its strong execution. In the consumer segment, we have exposure across staples and discretionary. Among staples, we own Tata Consumer and Godrej Consumer. These companies are expanding into new categories and making strong organic and inorganic investments to drive growth. For context, India's private final consumption expenditure (PFCE) is $2.6 trillion, higher than the GDP of the 10th largest economy, and growing at 10–12% annually. Companies with strong strategies and execution can capture a larger share of this consumer discretionary, we own Jubilant FoodWorks. We believe pizza, as an organised category in India, remains underpenetrated with a long runway for growth. We also hold names in consumer durables, where penetration is still low. Companies that can execute well on the ground have the potential to deliver strong mid- to high-teens growth. In the internet space, we continue to hold Paytm and Info Edge. We have a smaller holding in Zomato, having booked some profits. We are also evaluating new-age internet and consumer tech companies like Nykaa and FirstCry. While our exposure is currently limited, we believe some of these platforms could emerge as the next generation of large-scale consumer companies.
Time of India
23-05-2025
- Business
- Time of India
India in a mature bull market, still poised for positive returns: Pankaj Murarka
"Over the past five years, many of the low-hanging fruits have already been harvested. Significant money has been made, and valuations are now expensive. In fact, India is currently the most expensive market globally," says Pankaj Murarka , CIO, Renaissance Investment . Firstly, help us understand your outlook. What are you really pencilling in for the markets? Lately, a lot has been happening globally—we're in the midst of tariff uncertainty and its potential implications on businesses. However, back home, some macro indicators seem to be faring well. What's your sense of the Indian markets, and where do you see us heading from here? Pankaj Murarka: I've consistently maintained that we are in a bull market. My simple definition of a bull market, drawn from the original Dow Theory, is that markets deliver positive returns on a full-year basis. I still firmly believe markets will yield positive returns on an annualised basis. That said, I've also been highlighting that this is a mature bull market—we're now in the sixth year since it began, right around the onset of the COVID-driven lockdowns. Over the past five years, many of the low-hanging fruits have already been harvested. Significant money has been made, and valuations are now expensive. In fact, India is currently the most expensive market globally. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like War Thunder - Register now for free and play against over 75 Million real Players War Thunder Play Now Undo We must also acknowledge that we're experiencing a cyclical slowdown—partly due to domestic factors and partly due to global trade headwinds. Yet, India is arguably the best-placed market in the world today. I still believe earnings growth will recover starting this year, with Nifty potentially delivering low double-digit earnings growth, and markets generating similar returns. So yes, our view on markets remains constructive. However, investors will need to be selective—picking the right sectors and stocks is crucial. At the index level, returns are likely to be in the high single digits to low double digits, which is still quite healthy for a mature bull market at this stage of the cycle. What are you doing with your internet stocks? Pankaj Murarka: To be honest, we've booked some profits. What began as a highly contrarian, fear-driven trade has now turned euphoric. Valuations in some of the companies we liked are now pricing in growth too far into the future. The key with internet stocks is the ability to identify strategic winners over the next 5–10 years. In my view, the top two or three players in any segment will generate 130–140% of the industry's profits—implying the rest will lose money. So, picking the right winner, and at the right valuation, is critical. For example, take Zomato in the food delivery space. At ₹50, we saw significant profit potential and felt the stock was mispriced. Today, it appears to be pricing in too much future growth. While Zomato remains a category leader and should do well over the medium term, I don't expect much near-term upside in its stock price over the next 12–18 months. Since we manage clients' money, our investment horizon is 2–3 years. Strategically, I remain very positive on the internet space, but yes, we have partially exited some positions. Live Events Assuming that earnings growth will be good—but not extraordinary—and that finding companies growing even at 15% might be tough, how would you build a portfolio for the next three years? Specifically, one comprising companies with 15–20% top-line and 15–25% bottom-line growth, but whose valuations aren't overly stretched. Pankaj Murarka: Absolutely. You've hit the nail on the head. While aggregate earnings growth is likely to remain in the low double digits, there are pockets across sectors where growth is stronger. The key is to find reasonably valued companies within those areas. Take EMS (electronics manufacturing services) companies—they're growing fast, but are already priced to perfection. Instead, I prefer slightly lower growth—mid to high teens—if valuations are more reasonable. What matters to investors is actual returns, and you can achieve strong returns even with moderate earnings growth if you enter at the right price. Ultimately, it comes down to business models and management execution. Companies with strong execution at a strategic level can deliver outlier growth despite headwinds. To answer your question, there are three broad buckets we like: First, large banks. We own the top four private sector banks in India. These stocks are trading at a discount to the Nifty and offer reasonable valuations. They are capable of delivering mid- to high-teens CAGR returns over the next three years. So, this remains a core portfolio segment. Second, consumer and consumer-oriented stocks. Over the last six months, we've pivoted towards this space. These stocks underperformed over the past five years, but valuations are now back in line with long-term averages. With a likely revival in consumption, we're focusing on companies driving both organic and inorganic growth—those with strategies to outperform industry averages. Third, internet companies. Despite some profit-taking, we still hold names in this space. Select internet companies can grow 25–30% CAGR over the next 5–7 years and are reasonably valued. So, they remain part of our portfolio. In summary, these three buckets should help generate high-teens portfolio-level returns—an excellent outcome in a market cycle like this, with moderate risk. Now that you've sketched the broader picture, let's fill in the details. Within those three buckets, what are your top holdings or ideas? Pankaj Murarka: Starting with large banks, we own HDFC Bank—we've re-entered after a gap of three years. Post-merger, the bank had a period of consolidation and was underperforming industry growth. Now, we expect it to regain industry-leading growth within the next four quarters. We also own Kotak Mahindra Bank , and ICICI Bank remains a core holding given its strong execution. In the consumer segment, we have exposure across staples and discretionary. Among staples, we own Tata Consumer and Godrej Consumer. These companies are expanding into new categories and making strong organic and inorganic investments to drive growth. For context, India's private final consumption expenditure (PFCE) is $2.6 trillion, higher than the GDP of the 10th largest economy, and growing at 10–12% annually. Companies with strong strategies and execution can capture a larger share of this growth. In consumer discretionary, we own Jubilant FoodWorks. We believe pizza, as an organised category in India, remains underpenetrated with a long runway for growth. We also hold names in consumer durables, where penetration is still low. Companies that can execute well on the ground have the potential to deliver strong mid- to high-teens growth. In the internet space, we continue to hold Paytm and Info Edge. We have a smaller holding in Zomato, having booked some profits. We are also evaluating new-age internet and consumer tech companies like Nykaa and FirstCry. While our exposure is currently limited, we believe some of these platforms could emerge as the next generation of large-scale consumer companies.
