Rajeev Thakkar's advice for investors: Stay the course for 10,15,20 years

Rajeev Thakkar, chief Investment Officer and Director at Parag Parikh Financial Advisory Services (PPFAS), helms the popular equity scheme, Parag Parikh FlexiCap Fund. This scheme has compounded at 19% each year in the last 11 years. Thakkar speaks to Business Today about his investing philosophy and how his flagship scheme is navigating the treacherous volatility in stock prices. Edited excerpts: Dalal Street has witnessed a sharp correction in valuations. Given the relative stability in the markets now, where are you allocating fresh funds? As for investment opportunities, the current market environment is much more exciting compared to six months ago, when finding good opportunities was extremely challenging. However, this isn’t Like September-October 2008 or March 2020, when one had to liquidate bank accounts to invest heavily in equities. I don’t anticipate a V-shaped recovery, so it’s important to take your time and build a strong conviction before investing. Every key factor must align—the quality of the promoter and management, the strength of the business, the balance sheet, and the valuation—before making a purchase. Your portfolio holds significant positions in the financial services sector, including non-banking financial companies. Where are you allocating fresh capital? We have a substantial stake in private sector banks, which were already attractively valued even before the downturn. Following the corrections, they now appear to be even more reasonably priced. Fresh inflows are primarily directed toward some stocks we already own. Additionally, with the index correcting by 15-20% and certain individual stocks seeing steeper declines, several segments are becoming increasingly attractive. What are you most comfortable with—large-, mid- or small-caps—for this calendar year and maybe the next? If someone is investing in a market cap-based fund, I would recommend focusing on large-cap funds. But for those picking individual stocks, there will be opportunities across segments. Before the market fell, large-cap stocks were already relatively inexpensive. The correction has been deeper in small- and mid-caps. Even after the drop, large-caps remain relatively inexpensive and more attractive than their smaller counterparts. In general, smaller companies tend to have higher valuations, though there are notable exceptions. Among large caps, sectors linked to Indian consumption have been notably expensive. Even after the correction, these stocks remain costly. When compared to their earnings, they don’t offer great investment opportunities. When it comes to start-ups, valuations were largely based on projections of future market share and earnings. Many of them are still in the “cash burn” phase. Even after the correction, they don’t appear to be particularly cheap. However, there are exceptions. What is your outlook on earnings growth for Nifty in 2025? Historically, earnings growth tends to be stronger when competitive intensity is lower. Take the telecom sector, for example—when too many players entered the market, pricing pressures mounted. However, after significant consolidation and exits, pricing power returned, leading to earnings growth. Currently, we are seeing heightened competition across sectors, driven either by new entrants or disruptive technological shifts. Sales growth becomes more difficult in such an environment. Additionally, margins tend to shrink due to pricing pressure. How should a 25-year-old entering the market allocate Rs 10 lakh? For a 25-year-old with a stable income and essential financial protection in place—such as life insurance (if they have dependents) and general insurance—about Rs 9 lakh could be allocated to equities for the long term. However, the key is the commitment to stay invested. Many investors tend to react to short-term fluctuations, exiting too soon or frequently switching between investments. That’s where mistakes occur. If this person is in formal employment, they will likely contribute to the Employee Provident Fund until retirement. If they buy gold, it will likely be passed down for multiple generations. If they purchase a house, they will live in it for decades. Yet, when it comes to equity investing, data shows that many investors remain in the market for just two to three years before getting anxious and exiting. The real answer to asset allocation is simple: put 90% in equities, but more importantly, stay the course for 10, 15, or even 20 years. Investing isn’t about chasing quick gains or constantly reshuffling portfolios; it’s about long-term wealth creation. @Shail_bhatnagar

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Rajeev Thakkar's advice for investors: Stay the course for 10,15,20 years

Rajeev Thakkar, CIO and Director at Parag Parikh Financial Advisory Services, on navigating the choppy markets.