ETMarkets PMS Talk: Financials, Pharma, and Textiles: Top sector picks for 2025 by Prabhakar Kudva

Thanks for taking the time out. Please take us through the recent performance of the fund – PMS Active Alpha Multicap Fund and PMS Long Term Growth Fund.
January and February have seen a sharp correction in both the schemes in line with the broader markets. While the indices may not have fallen as much, our schemes do not index hug and invest in the broader market and consequently have corrected more than the headline indices. They are down close to 20% from the recent highs.

The fund have taken some hit in January, which is largely in line with the kind of sell-off seen in the broader markets. Does it make you cautious or more bullish?
The key change that investors need to realize is that the market environment has changed and hence what was working in the last 18-24 months may not continue to work.We need to make the portfolios forward looking, i.e. focus on where the fundamentals are likely to improve over the next several quarters. Also given that the correction has washed away quite a bit of froth it’s now a much more lucrative market to invest in.That doesn’t mean the markets cannot fall more but it is a good time to start incrementally deploying funds.

What is your investment objective?
Our key objective is to beat the broader market indices like the BSE 500 over a 3-5 year horizon.How do you pick stocks for the fund? What is your style?
We are driven by a host of variables that our model Sattva tracks. This includes quarterly earnings, sector dynamics, overall fundamentals as well as price-volume data to name a few.

Philosophy is a mix of quantitative and discretionary. The quantitative tells us where the opportunities might be, and the discretionary element allows us to filter from that list and build the portfolio.

The year 2025 started on a volatile note and the markets seems to be on a slippery slope especially after Budget 2025. What is your take on markets?
There are two ways to look at this. One, the structural India bull market is intact and there is nothing to suggest that anything has changed there. Two, we’ve had 2 great years, so a subdued year was to be expected.

However, how that subdued years plays out is not guessable. It could very well have been a longish time correction. But now it seems like it has been resolved by a deep price correction.

We expect this year to be a year of consolidation and rebuilding and should set the stage for the next mini cycle.

If someone plans to invest fresh money in 2025 say Rs 10 lakh – what would you advise especially for someone who is in 30-40 years? A staggered approach as there could be more fall or lump sum right now.
The first thing to do is to assess the risk profile and understand the liquidity horizon of this money as well as the risk appetite of the client.

If the liquidity horizon is 5 years or more and there is risk appetite to withstand volatility that is inherent to market, then they should definitely put in may be 50% now given that we’ve already had a decent correction and the rest over the next 6 months or so.

If the time horizon is there but the risk- appetite is not there they should consider conservative balanced funds. If both time horizon and risk appetite are not there they should go with debt funds or FDs.

Which sectors are looking attractive for investment in 2025 after a recent selloff?
Financials seem to be value plays. Pharma looks like a growth play. Textiles are a mix of both value and growth. Wild card is US tariffs so one needs to decide basis how that narrative plays out.

Are there any sectors that could see further tapering?
Companies that went up purely on stories and limited execution will find it hard to climb back up. Also, spaces like microcaps and SMEs will see liquidity drying up and one will need to be very selective here, if at all.

What are the kind of queries that you are getting from your clients especially when market is down by more than 10% from highs?
The main query is whether we could have gone into cash 3 or 6 months back. The answer is that most often the right time to go into cash is known only in hindsight.

Either you’re too early or too late and having done this across many cycles I have come to the conclusion that while it seems lucrative in theory, its hard to do it profitably and that to0 when measured across multiple corrective phases.

Also going into 20-25% cash doesn’t really help a lot net of costs and taxes – you’re probably better off by 2-3% if the markets correct 20% from the time you sold – making it not lucrative enough.

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