Over the previous 15 years, ValueQuest Funding Advisors has constructed its funding framework round what Shah describes as a “personal fairness method” to public markets—specializing in deep analysis, administration high quality, business buildings and long-term revenue swimming pools earlier than making funding selections.
On this version of ETMarkets PMS Speak, Shah discusses how the agency’s funding philosophy has advanced throughout market cycles, why concentrated portfolios can outperform when backed by rigorous evaluation, and the structural themes—from manufacturing and defence to AI, aerospace and power transition—that might form the subsequent decade of investing.
He additionally shares his views on the place alpha alternatives lie in at this time’s market and why a few of the most compelling funding concepts stay under-owned and under-appreciated by the broader market. Edited Excerpts –
Q) Worth Quest has accomplished 15 years within the funding administration enterprise. How has your funding philosophy advanced over time, particularly throughout completely different market cycles?
A) Over the past 15 years, our philosophy has remained anchored in figuring out structural themes and tendencies early, supported by a robust top-down understanding of the economic system and business cycles.
We mix this with deep bottom-up analysis to determine companies which can be rising leaders or credible challengers inside these themes.
What has advanced over time is the institutionalisation of our course of — we’ve got added stronger guardrails round threat, portfolio development and governance to enhance consistency of outcomes throughout market cycles.
This stability of conviction-led investing and disciplined threat administration continues to outline ValueQuest’s method.
Q) Your agency follows a high-conviction and concentrated portfolio technique. In a market the place diversification is usually emphasised, what offers you confidence on this method?
A) At ValueQuest, we comply with what we regularly describe as a “personal fairness method” to public markets — spending vital time understanding industries, administration groups, aggressive benefits, and long-term revenue swimming pools earlier than making funding selections.
We now have all the time believed that knowledgeable focus is completely different from speculative focus. Whenever you perceive administration high quality, business construction and enterprise fundamentals deeply, a concentrated portfolio can result in higher risk-adjusted outcomes.
Diversification past some extent it may possibly dilute conviction and influence. Our focus stays on understanding companies deeply and managing dangers proactively.
Q) ValueQuest has persistently centered on figuring out structural megatrends early. Which themes presently excite you essentially the most over the subsequent 5–10 years?
A) Over the subsequent 5–10 years, we stay extremely constructive on India’s manufacturing alternative, pushed by each home demand and international provide chain diversification. AI is rising as a defining international theme, and choose Indian corporations are more and more turning into a part of the hyperscaler and knowledge centre ecosystem.
We additionally see sturdy long-term potential in defence and precision engineering, particularly throughout aerospace and space-linked alternatives. Vitality transition continues to profit from highly effective structural and geopolitical tailwinds, whereas pharma CDMO and the rising GLP-1 ecosystem stay compelling healthcare themes. These alternatives are being formed by coverage help, technological disruption and rising strategic self-reliance globally.
Q) Given the present market valuations, the place are you discovering alpha alternatives at this time — largecaps, midcaps, or rising companies?
A) We don’t method markets by means of the lens of market-cap segmentation. Our funding course of is pushed extra by figuring out rising tendencies, structural shifts, and areas the place massive revenue swimming pools can doubtlessly develop over the subsequent 5–10 years.
Our top-down thematic analysis helps us determine sectors and companies which can be beneficiaries of those long-term modifications, no matter whether or not they’re categorized as largecaps, midcaps, or rising corporations.
Traditionally, alpha technology has typically come from figuring out under-appreciated companies early of their progress journey moderately than specializing in dimension classifications.
Q) The factsheet highlighted sectors similar to power transition, defence, aerospace, and manufacturing as key focus areas. What makes these sectors notably engaging from a long-term funding perspective?
A) These sectors are engaging as a result of they’re aligned with highly effective structural, geopolitical and policy-led tailwinds. Vitality transition is prone to speed up additional amid recurring oil shocks and the growing international give attention to power safety and localisation.
Defence spending can also be set to rise meaningfully over the subsequent decade as international locations prioritise self-reliance and trendy warfare shifts from conventional platforms in the direction of drones, anti-drone methods and superior applied sciences.
In aerospace and precision engineering, India has a robust structural benefit pushed by its engineering expertise, price competitiveness and rising function in international provide chains.
Q) India’s manufacturing story is gaining international consideration attributable to provide chain diversification and coverage help. How are you positioning portfolios to seize this chance?
A) Manufacturing is getting into a multi-year upcycle because the world strikes from an asset-light mannequin in the direction of rebuilding arduous belongings and resilient home provide chains, creating long-duration alternatives for globally aggressive Indian companies.
We’re positioning portfolios to capitalise on this chance largely by means of “picks and shovels” companies – notably capital items, industrial expertise and engineering-led corporations that allow this broader manufacturing buildout.
Our focus stays on figuring out corporations with sturdy execution capabilities, technological differentiation and the flexibility to realize market share as each home capex and international provide chain diversification speed up.
Q) As a agency managing over Rs 27,000 crore throughout mandates, how do you preserve agility and proceed producing alpha at scale?
A) Producing alpha at scale requires staying forward of rising tendencies whereas sustaining deep analysis and powerful threat self-discipline.
We want scalable companies with sturdy execution and market management, which permits us to deploy capital meaningfully with out shedding agility.
Our “personal fairness lens” helps us develop differentiated insights, assess industries with a long-term possession mindset, and determine early indicators when an funding thesis is evolving or getting challenged.
We consider mental agility and deep engagement with portfolio corporations are much more vital than trying to reflect benchmarks or cowl each sector.
Q) Which sectors or themes do you consider are nonetheless under-owned or under-appreciated by the broader market?
A) Most of the most compelling alternatives at this time are nonetheless in comparatively early levels of progress and sometimes lie outdoors benchmark indices, which naturally results in decrease institutional possession and market consideration.
Aerospace, precision engineering and AI/ knowledge heart performs are nonetheless early of their progress journey and never totally mirrored in market positioning.
Equally, power transition continues to be seen narrowly regardless of the lengthy runway and shifting revenue swimming pools rising throughout the ecosystem. We not too long ago put out a observe highlighting the identical.
(Disclaimer: Suggestions, recommendations, views, and opinions given by specialists are their very own. These don’t symbolize the views of the Financial Instances)
