India is at the stage where every theme is likely to do well in the long run – be it Consumption or Infrastructure. The largest working age population sooner or later will be in India. So, almost all the themes will do well over the next few decades.
It is just that at various points of time some theme will be cheaper in the stock market and another will be costlier. So, you will have to identify the themes where the risk/return reward ratio looks good. All themes will do well, but you will have to choose the right theme at the right moment. That framework is how we think about investing over the next few decades, and that's how we believe returns can be made.
Take Infrastructure. In 2007, the theme had become very costly. Take Pharma. In 2015, it was costly. Take Infotech. In 2021-2022, some of those stocks had become costly. So, at various points of time themes get overvalued because everyone looks at the last two years growth and extrapolates it for the next 10 years. So move from one theme to another, as some get cheap and present opportunities.
If you're going to buy where everyone is buying, then you're overpaying. In 2020 or 2021, people said value investing is dead and it's only FAANG stocks and the likes, and nothing else. Look what happened even globally.
At the end of the day, you want to make money. So buy cheap relative to intrinsic value, and have patience. Your investment won’t do well every month or every quarter or every year. Value Discovery Fund has had two patches of three years each where it did not perform - this over the last 19 years. But it has worked and delivered returns for investors.
In 1994, five years after starting to invest, I thought I knew everything. The reality check came in the 1994-’98 cycle and the Asian Financial Crisis. Now I realise that greed and fear is as important as knowledge. And 2007-2008 reiterated that.
People are so focused on thinking that they can make money out of the last bit of news. It is temperament that helps you and the ability to avoid getting carried away by the news of the moment or the mood of the moment. Stocks crashed in 2020, those who bought aggressively used the moment.
Using temperament to make money has been my biggest learning. Learn to manage your temperament, and you will have a good run as a long-term investor.
Sankaran Naren
Executive Director and CIO
ICICI Prudential Asset Management
