Market expert Gurmeet Chadha of Complete Circle Consultants has identified SBI Funds Management as a compelling investment opportunity, despite the asset management company's shares remaining under pressure following a tepid listing. According to reports from ET Now, Chadha views the stock as a strong franchise that could benefit from rising mutual fund penetration in India. The expert noted that the stock is currently trading below its IPO price and has emerged as one of his closely watched stocks.
Chadha highlighted a significant valuation gap between SBI Funds Management and other listed asset management companies. As reported by ET Now, the stock is trading at a discount of around 30-40% compared with Nippon Life India Asset Management and HDFC Asset Management Company. The expert emphasized that this discount presents an attractive opportunity for investors to participate in the growth of India's mutual fund industry, particularly given the company's position as the largest fund house with assets under management of more than ₹12 lakh crore.
While maintaining a positive outlook, Chadha acknowledged that SBI Funds Management has experienced some challenges in market position. According to ET Now reports, the fund house has lost some market share and performance in certain categories has slipped. However, Chadha compared this to similar experiences of HDFC and ICICI before the Covid period, suggesting such phases are common among large fund houses. He believes the strength of the SBI Funds Management franchise and broader growth in mutual fund penetration could support the company over the longer term.
Chadha noted a significant improvement in the company's earnings momentum, as reported by ET Now. He stated that the momentum is well and truly back and it's come back after almost two to three years now. This earnings recovery is particularly significant given the company's position as a beta play on rising market conditions, as management fees are linked to market-linked assets under management.
Beyond SBI Funds Management, Chadha identified several sectors offering investment opportunities, according to ET Now reports. He highlighted power equipment, capital goods, defence, select mid-sized banks, precision engineering and auto ancillaries as sectors with strong fundamentals. For the banking sector, he pointed to improving valuations of leading banks including SBI, HDFC, and ICICI, expecting improving credit growth and solid asset quality to eventually reflect in stock prices.
