Chokalingam Narayanan, Head of Equities for the PMS and AIF business at ICICI Prudential AMC, recently shared his insights on three pivotal emerging trends shaping global markets and offered an outlook on corporate earnings. In an exclusive interview with Business Today TV, Narayanan emphasized that sustained stock returns historically stem from a combination of earnings growth, improved return on equity (ROE), and a favorable risk-reward profile.
Global Supply Chains Evolve for Resilience
One significant trend Narayanan identified is the global shift towards diversified and resilient supply chains. He noted that while the period between 2000 and 2020 was dominated by a drive for the most efficient, globalized supply chains, recent geopolitical events, particularly ongoing conflicts, have accelerated a move towards a combination of local, friendly, and global supply networks. This shift prioritizes resilience over mere scale efficiency.
"When such things happen, you are not playing at scale, but you are playing for resilience. In that kind of a construct, companies which can participate in that creation of alternative supply chains tend to benefit. In that sense, manufacturing businesses are seeing better earnings growth," Narayanan stated.
This reorientation, he believes, particularly benefits manufacturing businesses capable of adapting to and participating in the creation of these alternative supply solutions.
Consumption Shifts Towards Experiences
The second key trend observed by Narayanan is a fundamental change in consumer behavior. Globally, individuals are increasingly opting to spend on experiences rather than purely on physical goods. This evolving consumption pattern has implications for various sectors, favoring those that cater to services, leisure, and personal enrichment over traditional product-based industries.
New Trade Agreements Open Markets
Thirdly, Narayanan pointed to the increasing activity around new free trade agreements (FTAs) as a significant area of opportunity. These agreements are opening up newer markets for companies that have the capacity to cater to diverse international demands at scale. This creates fresh avenues for growth and expansion for businesses positioned to leverage these new trade corridors.
Indian Market: A Period for Stock Picking
Discussing the Indian stock market, Narayanan described it as being at an "interesting juncture" given the geopolitical uncertainties of recent years. Despite these global headwinds, he believes the market's evolution makes it a prime period for astute stock picking.
From a macroeconomic perspective, India appears stable, with the fiscal deficit to GDP at a comfortable level and balance sheets across most economic constituents—including corporates and central/state governments—in reasonable health. Corporate earnings, after a subdued period two years ago, have shown a decent recovery, with mid-teens growth observed over the last three to four quarters.
However, recent developments, particularly the situation in the Middle East, have introduced some uncertainty, impacting earnings projections. While India might have anticipated 17-18 percent earnings growth for FY27, current estimates suggest a more conservative 12-13 percent, largely driven by pricing rather than volume due to ongoing supply chain challenges.
Narayanan also touched upon ICICI Prudential AMC's approach to PMS services, emphasizing them as solutions tailored to individual client needs, often involving asset allocation strategies developed in conjunction with advisors.