The rupee has slipped roughly 10% this year and 15-16% against the yuan over the past twelve months. For most people that could be a concern. For Anand Shah, it is almost useful.
“Rupee depreciation is part of the solution, not the problem,” said Anand Shah, CIO - PMS and AIF at ICICI Prudential AMC. India still consumes more than it produces, he points out. Labour is cheaper here than in China, yet the country runs a large trade deficit with a nation five times richer. Higher logistics and power costs widen the gap. A weaker currency, in his view, gives domestic manufacturers temporary but meaningful breathing space.
That view sits at the centre of how Shah is running money right now. Manufacturing over consumption. Value over growth. The preference has only hardened over the past nine months.
“Our focus is on companies that create wealth rather than market capitalization,” he says. “There will always be segments of the market we want to own and avoid. Ultimately, it comes down to a combination of business quality, management capability and valuation. While several large caps remain attractive, a greater proportion of mid and small caps appear to be expensive.”
The question, he adds, is not whether to own large, mid or small-caps, but which companies to own within each segment. Mid- and small-cap strategies offer greater breadth and more manufacturing businesses. Even in the flexicap funds, the team remains overweight mid- and small-caps and manufacturing. The dedicated small-cap strategy has been the best performer in the suite.