'Equity Investing In Good Shape And Fashionable As Ever!'

'In India's case, an extended earnings slowdown accompanied by rich valuations have dimmed returns since late 2024.'

At a time when some investors look for "instant gratification" from their investments, Saurabh Mukherjea, founder and chief investment officer of Marcellus Investment Managers, tells Puneet Wadhwa/Business Standard in an interview in Mumbai that long-term compounding is alive and "Coffee Can" compounding is working.

What has changed, according to him, is that the nature of these compounders has gravitated from being consumer staples and discretionary franchises to health care and export-oriented companies. Edited excerpts:

Is investing in equities as an asset class losing its appeal? Markets (headline indices) haven't done much in the last two years.

Almost every country's stock market, barring India's, has given healthy returns over the past two years.

So, equity investing is in good shape and as fashionable as ever! In India's case, an extended earnings slowdown accompanied by rich valuations have dimmed returns since late 2024. However, this too shall pass.

Do you think it is a good time to diversify into international markets since returns back home remain muted? If so, which markets and how can one invest?

Diversification exists and works because we cannot predict the future. Since no one knows what the future will bring, the late Harry Markowitz taught the world to spread their investments across various asset classes with low correlation.

Since the correlation of Indian equities with American equities is at its lowest in 20 years, the argument in favour of Indians diversifying globally remains compelling.

Those who are not doing it are missing out on what Markowitz called the 'only free lunch in finance'.

Is the era of compounding and "Coffee Can" portfolios in India over? Most largecaps are known stories and are slow compounders. Investors now want instant gratification.

Long-term compounding is thankfully alive and "Coffee Can" compounding is working.

What's changed is that the nature of these compounders has gravitated from being consumer staples and discretionary franchises to healthcare and export-oriented companies.

How are investors and wealth managers coping with Specialised Investment Funds (SIFs) that allow lower ticket sizes? Are they eating into your client base and denting financials?

I haven't, nor have our salespeople said that PMS (portfolio management services') investors are shifting to SIFs.

The main shift we are seeing is that affluent Indians are increasingly keen to get global diversification.

The regulatory reforms expedited by IFSCA, the Reserve Bank of India (RBI) and the government has made it cost efficient and tax efficient to invest globally.

So, how does a fund manager stand out in this era of thinning margins, high competition and limited investment avenues? Do you think artificial intelligence (AI) is overhyped, especially in the context of investing?

Just as the spread of personal computers and spreadsheets made information discovery and processing easier and faster, AI will drive rapid processing of investment information.

So, deep insights into economies and businesses will become even more valuable in this era.

Similarly, the ability to convince investors through compelling storytelling will become a valuable skill as digital fatigue sets in among the public.

Where do you see money-making opportunities in the current markets? How have you recalibrated your portfolio thus far in calendar year 2026?

In India, we are investing in export-oriented manufacturing companies.

In developed markets, we are investing in defence and aerospace, power turbines and plant construction, the data centre supply chain and in ultra-luxury consumption plays.

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Feature Presentation: Aslam Hunani/Rediff