ETMarkets Smart Talk: India may well be at the cusp of a multi-year capex cycle, says Farokh Pandole, Avestha Fund Management

“India may well be at the cusp of a multi-year capex cycle after an over decade-long gap. We enjoy political stability, have an enormous demand appetite (at the right price) and can selectively be a beneficiary of Aatmanirbhar and China+1 for some time to come,” says Farokh Pandole, Founder & Portfolio Manager at Avestha Fund Management.

In an interview with ETMarkets, Pandole who graduated with Honors in Economics from Harvard College in 1992 said: “Fund managers seem to be value buying in this dip. Managers were favouring value stocks over the growth stocks in the past 3-6 months.” Edited excerpts:


Avestha Multi-Cap growth Fund – a multi-cap fund rose 10% in April, outperforming benchmark indices by a wide margin and other PMS themes. What was your strategy?
Markets tend to reward discovery and transformation very handsomely. For the past 18 months, we have also been calling for a broadening of the market, with returns across more stocks and sectors than was the case pre-Covid.

April was a month that saw us get concentrated benefits of both the trends that allowed us to deliver the said returns. We remain high conviction on our portfolio names in terms of sustained growth ahead.

The fund has given a stellar performance in 1-2 year period. How do you pick winners for your portfolio?
Apart from the ability to demonstrate strategic transformation, we are extremely mindful of promoter quality encompassing vision, execution, and sensitivity to the minority.

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We look for companies with large addressable markets and the potential to harvest this potential through a degree of scalability.
Lastly, we are most pre-occupied with balance-sheet strength and the ability to optimize capital allocation.

What was your criteria of replacing stocks in the portfolio?
We hold stocks for the long run so that all the attributes we have described are allowed ample scope to develop fully.

However, if we have been proved wrong in our view or if the company evolves in a manner very different to what their stated objectives are/our expectation was, then that is the reason for us to replace the stock with what we believe are higher-return assets.

How do you manage risk?
We are long-only so can manage risk via higher cash positions or more diversification or more defensive positioning.

However, we are at pains to guide clients that the best risk mitigation of equity risk is by having a very long-term investment horizon, thereby not getting squeezed out of positions at times of elevated stress like GFC or Covid or recent war and QT-related nervousness.

With the benefit of hindsight, these stress points have proved glorious buying opportunities rather than vice-versa

What are your view on markets which have fallen in double digits from the recent peak?
India is the most attractive large, global economy if one were to compare medium-term growth versus inflation expectations.

India may well be at the cusp of a multi-year capex cycle after an over decade-long gap. We enjoy political stability, have an enormous demand appetite (at the right price), and can selectively be a beneficiary of Aatmanirbhar and China+1 for some time to come.

From this standpoint, large falls should be taken as an opportunity to enter equities. The Indian investing public has recently understood this proposition well, has deployed large money maturely during such falls, and acted as a remarkable foil to foreign investor selling.

Sectors on which you are overweight or underweight on?
We remain positive on private financials as these are large businesses with immense scalability and where only a small subset of players can participate in financing India’s growth as many are hamstrung for reasons of capital, risk management, talent, bad loans etc.

We are underweight on FMCG, IT as we believe stocks are priced expensively relative to their growth outlook and return potential

How did your love for equities blossom? Tell us a little about yourself?
I have always been fascinated with probabilities and odds. As I have grown older, I have developed a keen interest in behavioural finance and the power of history as a prescient guide for the future.

An appreciation for human emotions of greed and fear are a must for generating superior portfolio returns. The knowledge that human behaviour rarely changes, is useful while studying the history of companies to aid in extrapolating the future.

Apart from managing money, how do you keep yourself mentally fit?
A combination of reading, yoga, Netflix documentaries, and optimal sleep are great inputs for learning and unwinding.

Ample time to debate and revisit issues within one’s own personal framework of assessment leads to positive decision making over time.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times.)

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