Finance and renovation are the next big bets, says Nilesh Shah

“When we look at their growth and add to that, I believe consumer demand is still growing. Consumption patterns are changing—some categories are mature, while others are emerging. This growth is fueled by ambitious India. , and as investors, we need to identify the emerging categories and opportunities,” says Nilesh Shah, Envision Capital.

ET Now: It has been a great year for wealth creation. Now, real estate, gold and stocks are back in the picture. Broadly, India has seen a wealth impact of $10-12 trillion. With such a wealth effect, can consumption really stay down forever?

Nilesh Shah: Not at all. In fact, consumption is not low. I think we are focusing on one or two large listed companies and concluding that consumption is low, which is not entirely accurate. There is a lot going on below the surface in individual companies. The challenge in today’s consumption space is disruption. Established players are challenged by new entrants, leading to infighting between incumbents and challengers. For example, companies like HUL and D-Mart show modest growth due to competition from e-commerce and fast-paced commerce players. When we look at their growth and add to that, I believe consumer demand is still growing. Consumption patterns are changing – some categories are mature, while others are emerging. This growth is fueled by ambitious India, and as investors, we need to identify those emerging categories and opportunities.

ET Now: Within consumption, we see a clear difference. Post-Covid, there was a K-shaped recovery – premium consumption and asset classes performed well. However, inflation and stagnant income growth have affected the lower segment.

Nilesh Shah: It is a valid concern and a potential threat to India’s broader development. Job creation must accelerate, private capital expenditure needs to increase, and more reforms are needed to make India a more business-friendly environment. Broad-based job creation and rising wages will only happen when these sectors thrive. The biggest priority should be upskilling; Without it per capita income will not increase.

ET Now: So, gold, silver, snack stocks, alcohol companies, beauty brands or just Nifty—what’s your muhurta?

Nilesh Shah: For those who prefer direct market calls without deep stock research, Nifty is an excellent choice. Over time, Nifty has achieved substantial compounded returns, delivering around 11-12%, outperforming bank FDs. Apart from Nifty, investors should look at strong companies in the index. If you can identify the top five performing stocks out of the Nifty 50, you are in a good position. Besides the Nifty, there is a wider universe of stocks that could potentially yield better returns.

ET Now: Which three stocks have you held in the last three years, three have you bought in the last three months and three have you recently exited?

Nilesh Shah: That’s a complicated question! In capital markets, we have HDFC AMC and Angel One. We view this sector positively due to digitization and shift from physical to financial investments. We have also recently invested in renewables – solar and wind EPC companies. As for exits, we generally do not participate in IPOs immediately; We prefer to wait and assess.

ET Now: Do you still own Hitachi and IDFC First Bank?

Nilesh Shah: Yes, we continue to hold both. Our long-term view on them remains unchanged.

ET Now: You have followed traditional IT services closely. What is your estimate?

Nilesh Shah: Large IT companies, while still growing, have matured and are growing at around 3-4%. They are not growth plays but valuation arbitrage opportunities. The real interest lies in smaller companies helping enterprises adopt AI and big data analytics. These companies, with a market cap below ₹5,000 crore, have significant growth potential.

ET Now: Financials seem to be a common investment theme this Diwali. Do you agree?

Nilesh Shah: Yes, finances are promising. We are also interested in CDMOs in the pharma and luxury real estate markets. Financials, in particular, are still in the early stages of growth. While PSUs have strong runs, they can be strong for a while. That said, if valuations and market conditions align, they can still offer attractive opportunities.

ET Now: We have discussed many of your portfolio stocks. Any explanation?

Nilesh Shah: Yes, assume that we have a vested interest in the companies we discussed. Please do your own due diligence before investing.