Harish Krishnan, CIO – Equity of Aditya Birla Sun Life AMC, which managed funds worth $68.66 billion as of July-end, noted that more than half of the top 500 listed companies are now growing earnings at over 15%, compared with nearly one-third about 18 months ago.
At the same time, the proportion of companies trading above 50 times earnings has declined from peak levels, indicating that some excess valuations have eased.
“And therefore, these two points, to my mind, are very encouraging in the sense that you’re seeing an improvement in earnings growth, coupled with reasonable amount of froth dissipation from the broader markets. And therefore, we have a positive stance on equities,” he said.
Three sectors where the fund is cautious
Krishnan said Aditya Birla Sun Life AMC is currently reluctant to deploy additional capital in three areas.
The first is the capital markets ecosystem, where he believes increased competition and a surge in listed companies could limit profitability.
The second is defence, where strong order books are being offset by stretched working capital requirements.
The third is capital goods companies benefiting from the AI investment theme, where institutional ownership has become very high.
“If I leave these three spaces, we see value pretty much in every other aspect of the market.”
Focus on ‘good-to-great’ companies
Instead of making broad sector bets, Krishnan said the fund house follows a good-to-great investment framework that identifies companies gaining market share through differentiated execution.
“This is a market for micro. We want to go bottoms-up and identify some of these franchises which are transitioning from good to great.”
According to him, sector-wide weakness often creates opportunities to accumulate stronger companies at more attractive valuations.
He cited examples across insurance, airports, IT and auto ancillaries, saying the best opportunities often emerge when an entire sector is facing temporary headwinds but select companies continue to improve their competitive position.
New-age businesses among preferred themes
Asked about sectors with structural tailwinds, Krishnan highlighted new-age businesses as one of the fund house’s preferred themes.
He said companies in consumer technology, fintech and electric vehicles (EVs) could benefit as artificial intelligence (AI) improves productivity and lowers engineering costs.
Apart from new-age companies, Krishnan also identified chemicals and auto ancillary companies as areas where the investment team continues to find opportunities, supported by import substitution, export growth and India’s free trade agreements.
IPO approach remains selective
Krishnan said the fund house has participated in only about 20% of IPOs over the past two to three years.
He noted that only around 30% of IPOs have outperformed the Nifty 500 by more than five percentage points after listing, making stock selection more important than broad participation.
Rather than investing across every public issue, he said the strategy is to take meaningful positions only in businesses where the team has high conviction and sees long-term value creation.
He also explained why Lenskart remains a core holding despite its strong post-listing performance, saying the company has executed well and could emerge as one of India’s multinational companies with AI-driven use cases.
For the full interview, watch the accompanying video
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