Nilesh Shah On How To Pick Stocks In 2025 — 'Moderate Expectations,' Valuation Key

As the Indian stocks are set to close in 2024 amid a market correction and slowing economy, Nilesh Shah cautioned against expecting outsized returns in the short term as investors will have to tone down their "significantly" high expectations.

“This is a quality-over-momentum market. In this correction, momentum has slowed down,” the Managing Director of Kotak Mutual Fund told NDTV Profit in a televised interview.

Shah advised investors to shift their focus to sectors or companies with reasonable valuations. Private banks, telecom, rural-focused consumer staples, and pharma sectors are attractive, he said, adding, “Go for quality companies across these sectors. Price is what you pay; value is what you get.”

Expectations of returns have to be moderated going forward, and investors should adopt a longer-term perspective, Shah noted. While India may appear expensive on a price-to-earnings basis, he argued that it remains attractive when measured by price-to-earnings-growth metrics.

GDP growth began positively in the third quarter, supported by festive sales, a busy wedding season, and increased government capital expenditure. He expects GDP growth to rise to 6-6.5% in the upcoming quarter, up from the current 5.4%.

Chief Economic Advisor to the Government of India, V. Anantha Nageswaran, also indicated that the Q2 GDP growth estimate may be revised upwards in the coming days. He cautioned against overinterpreting the Q2 numbers, noting that the global uncertainty index had spiked during the period.

The Managing Director of Kotak Mutual Fund stressed the importance of a bottom-up approach. “From a risk-return perspective, it will be pure bottom-up stories."

Shah also encouraged optimism despite market challenges. “The glass is half full or half empty. It may sound intelligent to be pessimistic, but an optimist makes money in the market,” he concluded.

He advised investors to recalibrate expectations to high single-digit or low double-digit returns while maintaining a long-term investment horizon.