The recent wave of criticism around systematic investment plans (SIPs) says more about investor expectations than it does about the strategy itself, according to Vinay Paharia, Chief Investment Officer at PGIM India Mutual Fund. Speaking to NDTV Profit's Money Wise, Paharia pushed back against growing scepticism surrounding SIP investing after nearly two years of muted market returns.
He that many investors entered equities during an unusually strong bull run and are now experiencing their first prolonged period of consolidation. “People started expecting that every time we put money into SIPs, we would make money. But that's not the nature of the beast,” Paharia said. “Equity markets are doing exactly what they should be doing — surprising people in the short term.”
Correction, Not Crash
Indian equities have significantly underperformed several global peers over the past two years, weighed down by concerns around earnings growth, elevated crude oil prices, foreign fund outflows and, more recently, fears that India lacks a meaningful artificial intelligence play.
However, Paharia argued that the current phase should be viewed as a “time correction” rather than a painful market crash. “Historically, market corrections have been brutal. This time, markets have largely moved sideways. Investors have not seen a deep destruction of capital. In many ways, this is a much healthier correction,” he said.
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Addressing criticism that SIP flows have merely provided exit liquidity for foreign institutional investors, Paharia called such arguments overly simplistic. “Money is like water. It flows where opportunities exist,” he said. “If assets become significantly undervalued, capital will automatically move towards them.”
While he acknowledged that investors who entered markets during 2024 may have paid higher valuations, he described the subsequent period of underperformance as “tuition fees” rather than a structural failure of the asset class.
Despite near-term concerns, Paharia remains constructive on India's long-term prospects. He noted that the Indian economy continues to grow at roughly twice the pace of the global average and expects the companies in PGIM's investment universe to grow 300-400 basis points faster than broader corporate India over the long run.
A Sector PGIM Has Ignored
That optimism, however, does not extend uniformly across sectors. Paharia said PGIM has remained meaningfully underweight information technology stocks over the past year, citing artificial intelligence as a genuine long-term disruptor to traditional IT services business models.
“AI can create meaningful challenges not just for technology companies but for many sectors,” he said. “For Indian IT, the impact on terminal value is a legitimate concern.”
Instead, PGIM sees opportunities in healthcare services, telecom and select new-age consumer businesses. Hospitals and healthcare platforms benefit from structural under-penetration and rising demand, while telecom operators could emerge as indirect beneficiaries of the AI boom through their ownership of critical digital infrastructure.
The fund house is also positive on certain consumer internet and quick-commerce businesses that combine high growth, strong gross margins and operating leverage.
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