PMS Bazaar recently organized a webinar titled “Picking Stocks for Long-Term Returns: Leading Fund Manager Sanjaya Satapathy’s Strategies for 2025” which featured Mr. Sanjaya Satapathy, Portfolio Manager, Ampersand Capital LLP. This blog covers the important points shared in this insightful webinar.

The webinar blog covers insights from Mr. Satapathy on market correction and investment opportunities, emphasizing valuation adjustments, long-term growth potential, and key investment themes like technology, lifestyle shifts, and energy transition. It explores macroeconomic trends, banking sector resilience, and strategic investment approaches. Additionally, it discusses sector-specific insights, including industrials, pharmaceuticals, CDMO, electric vehicles, and consumer demand trends, highlighting opportunities in a recovering market.

Key aspects covered in this webinar blog are

• Understanding the current market correction
• Valuation adjustments and investment prospects
• Long-term growth potential in the market
• Key investment themes and sectoral opportunities
• Macroeconomic factors and budget implications
• Banking sector resilience and market stability
• Investment strategies for a recovering market
• Emerging trends in key industries and technologies

Summary: The market correction presents both challenges and opportunities for investors. Mr. Sanjaya Satapathy emphasized that while predicting market bottoms is difficult, valuations have improved significantly. Despite slower earnings growth, long-term potential remains strong, with mid-cap indices expected to grow by 18%. Key investment themes include AI, lifestyle shifts, and energy transitions. Banking sector resilience and macroeconomic trends suggest market recovery. Investors should focus on companies with solid fundamentals, especially in the industrials, pharma, and EV sectors, while adopting a diversified, growth-oriented approach.

Market Correction and Investment Opportunities

Mr. Sanjaya Satapathy started by addressing concerns regarding the current market correction, emphasizing the key question on every investor’s mind: whether this is a favorable time to invest or if further pullbacks are expected. While it is impossible to predict the market’s exact bottom or peak, he noted that the risk-reward scenario appears favorable at present.

Valuations, which were a major concern in the previous year, have significantly corrected. Key market indices have declined by approximately 15% from their peaks, and over half of the top 500 companies have experienced declines of more than 30-40%. Among these companies, about one-third are now trading below 25 times the price-to-earnings (P/E) ratio, with an additional 40% trading between 25 to 50 times P/E. The current average of around 35 P/E is considered more reasonable compared to previous valuations.

Long-Term Growth Potential

Despite a slowdown in earnings growth, projections indicate a 12% profit growth for large-cap indices and an 18% earnings growth for mid-cap indices over the next couple of years. Mr. Satapathy highlighted the importance of long-term investment perspectives, as stock market sentiments can overshadow long-term trajectories. The current correction presents an opportunity to capitalize on favorable risk-reward conditions.

Preferred Investment Themes

Mr. Satapathy shared insights into sectors and themes expected to demonstrate strong growth. Key areas of focus include:

• Technology Disruptions: Advances in artificial intelligence, pharmaceutical research, and electronics continue to shape market opportunities.
• Lifestyle Changes: Structural shifts in consumer behavior, such as a preference for SUVs, premium motorcycles, luxury travel, and high-end hotels, are expected to sustain strong growth.
• Energy Transition: Investments in renewable energy and sustainability initiatives are gaining momentum and present long-term opportunities.

While these themes show promise, he cautioned that not all companies within these sectors possess the capability to execute strategies effectively. Investors must focus on businesses with strong execution capabilities and robust return on capital employed (ROCE).

Macroeconomic Factors and Budget Expectations

As the country approaches the budget announcement, it is crucial to consider macroeconomic factors influencing market trends. One of the primary reasons behind the recent market pullback has been the slowdown in GDP growth, which declined from 8.2% in the previous year to 6.2% currently. The Reserve Bank of India (RBI) had initially projected a GDP growth rate of over 7% for the financial year, but downward revisions have impacted investor sentiment.

However, historical patterns suggest that markets tend to recover following periods of economic slowdown. The September quarter recorded the lowest GDP growth at 5.4%, and a gradual recovery to 6.2% and beyond is anticipated. Past trends indicate that when macroeconomic indicators bottom out, market sentiment typically improves, leading to a potential market rebound.

Banking Sector Resilience and Market Stability

A significant factor supporting market resilience is the strength of the banking system. Low non-performing assets (NPAs) and stable banking credit costs indicate a robust financial sector. The absence of a financial crisis historically reduces the depth and duration of bear markets. While short-term fluctuations of 10-15% are possible, the overall resilience of the financial system provides a foundation for market recovery.

Investment Strategy and Portfolio Performance

Mr. Satapathy reiterated the focus on growth-oriented investment strategies. Even during periods of market downturns, his portfolio companies achieved over 20% earnings growth in the second quarter. The expectation remains that portfolio companies will continue delivering strong performance despite broader market volatility.

India’s economy, still growing at over 6%, offers numerous investment opportunities. While global economies, including the U.S., have performed reasonably well, India’s market downturn has been relatively isolated. If GDP growth stabilizes and recovers as projected, and if portfolio companies maintain their growth trajectories, positive returns for investors can be anticipated.

Market Recovery and Future Outlook

Despite a challenging start to 2025, Mr. Satapathy expressed confidence that the market may have reached its bottom. A combination of valuation improvements, economic recovery, and strong portfolio performance is expected to drive positive momentum in the coming months. Diversification remains a key risk management strategy, ensuring resilience against market uncertainties.

As the market navigates these dynamics, investors are advised to focus on businesses with strong fundamentals, execution capabilities, and sustainable growth prospects. The emphasis should remain on not just market narratives but also on financial metrics to make well-informed investment decisions.

Consumer Sector Trends: Rural vs Urban Performance

According to Mr. Sanjaya Satapathy, the third quarter presented a mixed financial picture. While consumer-facing companies continued to experience certain challenges, rural-focused businesses showed signs of recovery. However, the consumer sector exhibited divergent trends, with rural areas performing relatively better while urban demand remained weak.

For instance, Zomato reported a mere 2% quarter-on-quarter growth in its food delivery segment. The company attributed this sluggish performance to a slowdown in consumer demand from mid-November onwards. While the festive season initially drove satisfactory numbers, demand weakened significantly post-festivities, indicating fluctuations in consumer behavior.

Commodity and Banking Sector Overview

The commodities market continued to reflect a mixed performance, with some areas maintaining stability. The pharmaceutical sector remained steady, and banks did not exhibit significant declines, suggesting resilience in certain financial segments.

Industrial Sector: Evaluating Market Positioning

Discussing the Product Growth Opportunities Fund, Mr. Satapathy acknowledged that industrials had played a significant role in the portfolio. However, since December, industrial stocks have underperformed, largely due to market volatility.

He emphasized that within the industrial sector, the fund had strategically exited deep cyclical stocks. Certain railway-related stocks had previously benefited from strong demand, and timely exits had been executed at optimal prices. However, not all stocks had been offloaded as initially planned.

The industrial sector can be categorized into three key segments:

1. Deep Cyclicals: Industries such as railways and wind energy tend to perform well for a few years before facing downturns.

2. Short Cyclicals: Companies like Polycab, which supply wires and cables, and Cummins, which provides engines for data centers, tend to maintain relatively stable performance.

3. Non-Government Dependent Industrials: These include firms that are less influenced by government policies on infrastructure and raw materials.

The fund had shifted focus toward short-cyclical industries and those independent of government infrastructure policies. Companies such as Blue Star, PG Electroplast, and others engaged in manufacturing air conditioners were considered attractive industrial investments due to their relative stability compared to firms like Hindustan Aeronautics or Bharat Heavy Electricals Limited (BHEL).

Selective Industrial Investments: A Bottom-Up Approach

The investment strategy involved trimming exposure to deep cyclical stocks while positioning funds in companies with more stable revenue streams. Additionally, industrial businesses engaged in emerging technological advancements, such as Cummins, were considered favorable. The company was expected to benefit from increasing data center requirements and regulatory changes related to emissions, which could offer a competitive edge over domestic rivals.

The fund had refrained from investing in consumable industrials, such as bearing manufacturers and abrasives, due to limited valuation comfort. Despite the potential of these segments, they were not viewed as viable options under prevailing market conditions.

CDMO and Pharma Manufacturing: Growth Prospects

Regarding the Contract Development and Manufacturing Organization (CDMO) sector, Mr. Satapathy highlighted its long-term potential. While CDMO represented a significant market opportunity, Indian companies still accounted for a relatively small market share.

The strategic preference for CDMO over generic pharmaceuticals stemmed from market dynamics. Generic pharmaceutical companies constantly faced pricing pressure, with expectations for continuous price reductions. This necessitated frequent new product introductions, making it a complex and resource-intensive industry. Conversely, CDMO firms focused on research and development support, avoiding the pricing erosion challenges associated with generics.

AI and Market Expansion in Pharma Research

Emerging technologies, particularly artificial intelligence, were accelerating drug development. However, AI-driven molecular research still required clinical validation, further reinforcing the demand for CDMO services. As a result, despite short-term market fluctuations, CDMO was considered a promising long-term investment theme.

Outlook on the Electric Vehicle (EV) Sector

Discussing the electric vehicle (EV) market, Mr. Satapathy noted that the Production-Linked Incentive (PLI) scheme aimed to replace 30% of vehicles in India with electric models by 2030. While this sector held significant potential, investment strategies would depend on evolving government policies and technological advancements

Mr. Sanjaya Satapathy covered all the topics mentioned above in-depth and answered questions from the audience toward the end of the session. For more such insights on this webinar, watch the recording of this insightful session through the appended link below.

Get access to rich data and analytics of PMS & AIF by subscribing to us. Join the 75000+ investors & experts: Subscribe NOW