Zerodha co-founder Nikhil Kamath has revealed he is fully invested in the Indian stock market, with a 90% allocation to equities – his highest in recent memory. Speaking at the World Economic Forum, Kamath acknowledged a growing impatience among investors due to the market's relatively flat performance over the past few years.
Bullish on India's Long-Term Potential
Kamath remains optimistic about India's long-term growth trajectory. He stated that historically, the Indian market has consistently delivered 11-12% returns over 10-20 year periods, and expects this trend to continue. "People are getting restless and their portfolios have not seen significant upside," Kamath noted, adding, "But that is the nature of investing in equities... we will come around."
Investment Thesis and Key Sectors
Kamath's investment thesis heavily favors India, accounting for 95% of his portfolio. He highlighted several themes and sectors he finds attractive:
- Energy Transition: This includes electric vehicle manufacturers and battery technology companies.
- Information Technology (IT): Taking a contrarian stance, Kamath is acquiring shares in well-managed IT services companies trading at attractive valuations (13-14 times forward earnings per share).
- Healthcare: Pharma and hospital sectors are also on his radar.
- Tourism: Identifying potential in the burgeoning tourism industry.
His bullishness is partly fueled by a fall in oil prices to $73-74 a barrel and the rupee's depreciation, which makes Indian companies appear relatively cheaper.
Role of Speculation in Market Liquidity
Addressing recent discussions around stricter regulations on futures and options (F&O) trading, Kamath defended the role of speculation in maintaining market liquidity. He argued that a degree of speculation is essential for a robust and deep market, citing examples like SpaceX's ability to raise significant capital in the US due to its liquid market. "If not for speculation... if all of them were to go away one day, I think the market will become very shallow. It would be a much bigger problem than having some speculators today," he cautioned.
"Over a long-term, 10-20 year period, we have always ended up delivering 12-14 per cent return. The last couple of years were not great, but we will come around."
— Nikhil Kamath, Co-founder, Zerodha