The country’s macroeconomic backdrop is fundamentally resilient, with inflation under control and the fiscal situation stable. The only soft spot that remains is domestic demand, which has moderated in recent quarters but could bounce back, thanks to the government’s goods and services tax-related support and rate actions by the Reserve Bank of India (RBI), believes Nimesh Shah, managing director and chief executive officer of the IPO-bound ICICI Prudential AMC. Asked about the increasing competition in the AMC business, Shah said that low household participation in mutual funds (MFs) and the track record of the fund house create enough room for growth among all contenders.
You will join the ranks of listed asset managers like Nippon AMC, HDFC AMC, Aditya Birla SunLife, etc. It’s fully offer for sale (OFS), so how do you see the listing benefiting the company over the years?
Listing does not change the way we run the company. Our fiduciary responsibility, investment philosophy, and risk management remain exactly the same. The mutual fund structure in India is designed so that shareholder outcomes are directly linked to investor outcomes. Hence, the focus remains on delivering a good investment experience to our investors.
The anchor portion saw robust participation by Sovereign Wealth Funds (SWFs), long-only funds, etc. How do you think the overall appetite for the last big issue for the year will be, given that almost half of 2025 listings are trading below their issue price?
Primary markets are mainly driven by fundamentals rather than short-term price movements. While market sentiment can fluctuate, capital tends to gravitate toward businesses with durable models, strong governance and long-term growth visibility. India’s economic trajectory, rising financialization of savings and increasing institutional participation continue to provide a supportive backdrop for public issuances.
Your performance as a fund has been top-notch, with your share in industry operating profit at 20%. How do you view the future, given the entry of the likes of JioBlackrock? Is there enough room for more than the 54-odd AMCs?
Household participation in mutual funds is about 10% in India. There is enough room for growth for all. New entrants bring innovation and help expand the category through investor awareness. Over time, however, investor capital tends to consolidate with managers who demonstrate consistent fund performance across cycles, strong investment processes and disciplined risk management. What is important is the quality of outcomes delivered.
While household savings in MFs are on the rise—28.7% as a percentage of bank deposits in 2025 from 13% ten years ago—do you worry about the impact of flat markets on investor folios if the markets remain sideways next year too?
We believe some of the most valuable investor experiences are built during periods when markets move sideways or remain volatile. Hence, over the years, we have focused on developing hybrid solutions that are designed to help investors navigate such environments with ease. These strategies dynamically invest across asset classes based on prevailing market conditions. As a result, even when headline indices deliver muted returns, disciplined allocation and volatility management can still produce reasonable outcomes for investors, as was seen during last year.
There are fears now that rising inflation could eat into household savings (falling rupee) and impact the AMC business if Indian markets continue to underperform their emerging market (EM) peers, mitigating the benefits of GST and IT rate cuts earlier this year. What’s your view?
India’s macroeconomic backdrop remains fundamentally resilient. Inflation is contained, the current account deficit is comfortable, and the fiscal position is stable. Corporate and banking sector balance sheets are stronger after years of repair, leaving no major structural concerns at this stage. The only soft spot is domestic demand, which has moderated in recent quarters. However, this weakness is cyclical, not structural, and is relatively straightforward to address through monetary and fiscal actions. Both the government and the Reserve Bank of India have already taken steps through rate adjustments and GST-related support and have further signalled readiness to do more if conditions arise. With this foundation in place, the expectation is for economic activity to gradually accelerate.
Which sectors are you bullish on and which ones will you avoid, given your countercyclical tilt and a trade deal with US still impending?
The trade treaty will serve as a positive trigger for the market. However, currently, no sector is cheap. We are positive on banks and the energy sector, given its reasonable valuation on a relative basis. IT, too, is reasonably valued, and also the sector ownership is low as sentiments are dented. However, deal wins remain strong, providing visibility of growth from a medium-term perspective. Another sector is pharma, where the domestic market is growing at a healthy pace.
We are cautious about select mid-cap names where valuations have turned very expensive. Within other sectors, we are considering names which have seen periods of underperformance, thereby creating attractive entry points for reasonable long-term returns.
Do you feel that foreign direct investment (FDI) flows will increase over time—Amazon, Google, Microsoft commitments—and help India tide over its balance of payments problems, which have been plagued by low strategic investment and portfolio outflows?
India is not facing a balance of payments challenge in any structural sense. The current account is comfortably manageable. What we periodically see are fluctuations in capital flows, which are driven more by global sentiment than by domestic fundamentals. Such volatility is inherent to open markets and is exactly why India maintains strong foreign exchange reserves. These buffers allow the economy to absorb temporary portfolio outflows without stress. Over the medium term, strategic FDI will naturally align with growth prospects. Even in the interim, India is well-positioned to handle capital flow cycles.
Retail inflows are cushioning the market fall, but new issuances are not letting it rise…
This reinforces our view that return expectations should be realistic. If strong inflows coincide with a moderation in new issuances, it would create room for the market to move higher.
