He pointed out that the government and the Reserve Bank of India (RBI) are working in tandem to boost liquidity, consumption, and capital expenditure, which should aid growth momentum. “Both the government and the RBI were working in unison. They were focusing on increasing liquidity and boosting consumption as well as capex,” he said.
Singhania also noted that global conditions have turned more benign, with geopolitical risks easing outside of the Russia-Ukraine conflict and the US heading into a rate-cut cycle — typically a positive signal for equities. He said the “tariff issue is more a question of ‘when’ rather than ‘whether’,” and that overall earnings visibility looks better now than it did a few quarters ago.“Consumption has picked up in a big way. The RBI and government stimulus measures are working on the ground. In India, we need earnings growth, which was missing. Hopefully, if December and March quarter earnings growth come back, and with confidence returning, we should be back on track,” Singhania said.
Reflecting on the market’s performance this year, he described it as “challenging” but not disappointing. “The last four years were so good that expectations were very high. Normally, in a challenging year, you lose money. This time, even a flat year feels like a challenging year,” he remarked, adding that investors are comparing Indian equities with other performing asset classes like gold, silver and global markets. “Life is relative. On a relative basis, equity investors are unhappy, but on an absolute basis, after four great years and so many challenges, it’s not been a bad end,” he added.
On portfolio performance, Singhania said Abakkus’ cautious stance helped limit losses. “Metals did well for us. Financials did well, particularly some niche financials and non-fund-based ones like insurance companies and savings or capital market plays,” he said, naming Sarda Energy, Jindal Stainless, IIFL and Aditya Birla Capital among the better performers.
The veteran fund manager also confirmed buying into Edelweiss Financial, aligning with his belief in identifying opportunities where sentiment remains weak. “You make alpha by being a little ahead or by buying something where there’s still some apprehension,” he said.
On the IPO market, Singhania acknowledged that while quality companies continue to come to market, valuations remain stretched. “Bad companies with bad valuations are more on the smaller-company side, while larger companies are generally good, but with very high valuations,” he said, advising investors to be selective. “Even now, valuation expectations are high… this is a time when one has to learn to say no.”
Despite the near-term challenges, Singhania remains optimistic that India’s structural growth story remains intact. He expects the ongoing policy push, improving consumption and a recovery in corporate earnings to pave the way for stronger market performance in the coming quarters.
Below is the excerpt of the interview.
Q: People have been complaining it’s been a bad year, etc., but if you actually tally the returns, there are a lot of 20%, 30%, 40% kind of movers this year.
Singhania: It’s been a challenging year. The last four years were so good that expectations were very high. Normally, in a challenging year, you lose money. This time, even a flat year feels like a challenging year. More importantly, because alternatives — other markets like China, Europe, the US, Japan, Hong Kong, and Korea — are doing well. Gold and silver are doing well. So, obviously, equity investors keep comparing. Life is relative. On a relative basis, equity investors are unhappy, but on an absolute basis, after four great years and so many challenges, it’s not been a bad end.
Q: Indians should not complain about gold, at least.
Singhania: But what happens typically is that larger investors’ percentage allocation to gold is smaller, while for smaller investors, it’s higher.Q: But Sunil, what’s the setup looking like? We’ve had a tough year. Not much money has been made, but is the worst priced in now? Do you feel there’s a reason for investors to be bullish on equities?
Singhania: We were a little apprehensive over the last 15–18 months in terms of putting big money to work. But in the last two to three months, we’ve started getting constructive. I would say, other than the tariff issue, even a few months back, things were falling in place. Both the government and the RBI were working in unison. They were focusing on increasing liquidity and boosting consumption as well as capex.
Globally, the world is a lot more peaceful. Other than Russia-Ukraine, most of the small conflicts, at least for now, are behind us. To some extent, we should give some credit to Trump. Even on the Ukraine-Russia front, there was a meeting, and maybe some progress has been made. The US, after the initial uncertainty, looks like it’s heading into a rate-cut mode, which normally is a good sign.
The tariff issue is more a question of “when” rather than “whether.” Earnings are looking good. I was travelling yesterday, and wherever I go, I ask around for leads. Consumption has picked up in a big way. The RBI and government stimulus measures are working on the ground. In India, we need earnings growth, which was missing. Hopefully, if December and March quarter earnings growth come back, and with confidence returning, we should be back on track.
Q: In your portfolio, can you tell us which were the big hits and big misses of the last one year?
Singhania: Luckily, because of our cautious nature, we don’t lose big. So the portfolio is okay. I wouldn’t say it was the best year — just an okay one. Metals did well for us. Financials did well, particularly some niche financials and non-fund-based ones like insurance companies and savings/capital market plays.
Some niche stocks did well — like in the metal pack, Sarda Energy and Jindal Stainless performed very well. Among NBFCs, IIFL had a very strong year after a weak one. Aditya Birla Capital did well too. Even on the wealth and asset management side, we had some good picks. Overall, we didn’t lose much in any stock, which is why, even in a challenging year, we’re okay.
Q: You also recently purchased Edelweiss Financial.
Singhania: Yes, it’s the same theme. You make alpha by being a little ahead or by buying something where there’s still some apprehension. Obviously, you have to work hard. In such stocks, where we believe the worst is behind and upside may take time, we don’t mind waiting. If you’re right, the alpha can be huge.
Q: Two pockets I want to take your view on — one is the IPO market, and the other is the SME space. There’s been a frenzy in IPOs, but not everyone has made money. And in the SME market, you’ve identified some good winners. First, on the IPOs — which leg are we in now? Are you seeing bad companies with bad valuations, or good companies with bad valuations?
Singhania: I think both. Bad companies with bad valuations are more on the smaller-company side, while larger companies are generally good, but with very high valuations. At the same time, there are pockets where promoters are good, valuations are decent, and the business potential is solid. So, I wouldn’t write off every IPO.
Q: What’s your trademark for buying into an IPO? Any red flags?
Singhania: We’re very cautious. Even now, valuation expectations are high. The important thing is that in the listed space you have a track record, you have history. In IPOs, you have to believe in the promoter’s story, and usually, every promoter claims 3x economy growth rates. You have to decide whether to believe that or not. I’d say this is a time when one has to learn to say no.
Watch accompanying video for entire discussion.
