Why Investing in Fundamentals Is Key Right Now: ICICI Prudential’s Anish Tawakley Shares Insights

Anish Tawakley, Co-Chief Investment Officer of Equity at ICICI Prudential AMC, explains why focusing on strong company fundamentals is more important than ever for investors. He suggests that asset allocation products like balanced advantage and multi-asset funds are smart choices in the current market environment.

Is the Market Set to Rise or Stabilize?

Right now, stock valuations are high. Instead of chasing quick returns, Tawakley and his team are focusing on protecting capital and managing risks. He notes that much of the potential gains have already been priced in, especially for large-cap stocks, while small- and mid-cap stocks pose higher risks. He also warns that many inexperienced investors are over-optimistic in these areas.

Will the U.S. Face a Recession?

Tawakley believes the U.S. has already achieved what many feared wouldn’t happen — a “soft landing.” Inflation is under control, and unemployment is low, which means a recession is unlikely unless there’s a big shift in inflation expectations.

Key Investment Strategies Right Now

Instead of looking for entire sectors to invest in, Tawakley and his team are focusing on specific concerns. For instance, he believes earnings expectations in the FMCG sector are too high and could lead to disappointments. He’s also cautious about the metals sector, as China’s recovery is expected to be driven by consumption rather than infrastructure, which would reduce demand for metals. The IT sector is another area of caution, as Indian IT companies are showing weak growth even though the U.S. economy remains strong.

Domestic Cyclical Recovery: Past Its Peak?

Three years ago, ICICI Prudential AMC had a positive outlook on the domestic cyclical recovery, leading them to invest heavily in sectors like automobiles and cement. However, those bets have largely played out, and the focus is now on being more selective. Many stocks in this area are pricing in overly optimistic margins, which may not be sustainable as capacity utilization peaks.

Growth Stocks or Value Picks?

Tawakley isn’t chasing high-growth stocks right now. He emphasizes stock-picking based on individual company fundamentals rather than betting on a broad shift toward growth stocks. He believes in a balanced approach, picking up stocks that are either undervalued or that offer both growth and quality. While ICICI Prudential AMC is often considered a “value house,” Tawakley says they’re actually more contrarian in their strategy.

What’s Working for ICICI Prudential Bluechip Equity Fund?

Tawakley attributes the fund’s recent success to avoiding big mistakes in large-cap stocks. The fund focuses on a “barbell” approach, mixing cheap value stocks with growth and quality picks, helping them balance risk and reward effectively.

How Are They Managing the Small-Cap Fund?

Tawakley says the small-cap market is irrational right now, and they are focusing on protecting capital rather than chasing high returns. As a result, they are holding a significant amount of cash and keeping small-cap exposure below 70%, with the rest in large and mid-cap stocks.

Thoughts on Momentum Investing?

Momentum investing — buying stocks that are already performing well — isn’t part of ICICI Prudential AMC’s core strategy. Tawakley believes in managing risk by selling when a stock is high, rather than adding to the position.

Advice for Investors

Tawakley recommends asset allocation funds, such as balanced advantage or multi-asset funds, which adjust according to market conditions. These options can provide more stability in uncertain times.