According to Invesco Mutual Fund president and chief investment officer Taher Badshah, India's fundamental growth drivers remain insufficient despite recent improvements in geopolitical conditions and declining oil prices. As reported by Business Standard, the key challenge lies in investment levels that remain below optimal levels, with India continuing to rely heavily on services sector. Manufacturing and industry, which create stronger multiplier effects through employment and allied sectors, are yet to contribute at the required scale. Between FY22 and FY24, public capital expenditure expanded rapidly, supporting broad-based market recovery despite the Russia-Ukraine conflict, while private investment remained weak but government spending was sufficient to drive growth across sectors.
Badshah maintains that FY27 should be a recovery year for India, supported by a favourable base effect, last year's policy measures, carryover impact of good monsoon, and improving earnings. According to Business Standard, some headwinds from last year such as tariff uncertainty and artificial intelligence-led divergence in global markets are beginning to fade. As the AI trade narrows and earnings recover, India is well positioned to benefit from mean reversion, with the country's economic resilience expected to improve through stronger domestic growth engines.
Regarding earnings growth prospects, Badshah noted that about half of the listed universe is delivering over 15% earnings growth, with many companies growing above 20%. As reported by Business Standard, aggregate earnings at index level don't tell the full story, with the more relevant question being how many companies are compounding at these rates. The investment approach focuses on building portfolios capable of delivering attractive returns even with modest aggregate earnings growth, as long as enough companies are compounding at high rates. On valuations, he acknowledged that buying great businesses at cheap valuations isn't always possible, with the market quick to recognise quality and reprice it.
According to Business Standard, the investment strategy focuses on balancing visible growth with value opportunities. On the value side, IT services and banking sectors, while not performing well today, offer reasonable valuations with potential for turnaround over the next two to three years. Growth opportunities exist in industrial companies with strong earnings visibility, consumption and new-age businesses with long growth runways, and healthcare sector which offers consistent compounding despite premium valuations. The approach emphasises buying businesses with addressable market potential, competitive advantages, and ability to compound earnings over 2-3 years, even if valuations appear expensive in traditional terms.
As reported by Business Standard, Invesco targets 13-15% returns which remain attractive compared to fixed deposits yielding around 7%. The investment philosophy focuses on delivering meaningful absolute returns rather than benchmark outperformance, with returns in this range creating better investor experience than single-digit returns that beat benchmarks. The approach involves buying businesses capable of compounding earnings at 15% or more, with benchmark outperformance mattering but not at the cost of delivering weak absolute returns.
