He considers corrections of 15-20% as “pretty much powerful” and a normal occurrence even in a bull market. Shah views the current correction as an opportunity, suggesting that “a few quarters down the line when we look back, we would think that what a correction that was and what an opportunity that presented.”
Regarding the IT sector, Shah sees the short-term correlation with NASDAQ and US markets. However, he pointed out the challenge of tepid growth faced by largecap IT companies. “The growth is back to the US GDP which probably grows at around 2-3% and versus that, they have been growing at about 4-5% in dollar terms,” he said. He sees limited growth potential in top-tier IT names, stating, “From a growth point of view, there’s no juice in the largecap IT names.”
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Shah sees a “big opportunity” in tier 2 and tier 3 IT companies, especially those developing “their own agentic AI solutions.” He believes these companies can achieve “strong double-digit kind of growth over many years.”
He also highlighted the attractiveness of some tier 2 enterprise software companies that have corrected significantly in valuation. “I believe that’s where the focus of investors should be and not necessarily basically focus on the top three or top four companies.”
Shah remains bullish on midcap and smallcap companies from a medium to long-term perspective. “I would still think further from a medium to long-term perspective, it still has to be the midcap and the smallcap,” he said. He cited their faster growth, improved capital efficiency, and better access to capital as key advantages. “Given their relatively smaller size and being very strong in several niches, gives them a strong tailwind of growth.”
He contrasted this with largecap companies, which he believes have been “struggling with growth.” Shah suggested that if largecaps can only provide “high single-digit return,” investors might as well be in fixed income.
Shah is “absolutely convinced” about the growth potential of digital platforms. Despite the recent correction, he believes that “over the next three to five years, the digital platform companies will keep compounding in double-digit rates.”
He emphasised their insulation from tariff and dollar devaluation risks and their strong domestic growth opportunity. “I believe that this correction that we have seen of about 30 to 45% in digital platforms or digital companies clearly is not just great from a risk point of view, but is also great from a growth point of view.”
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Apart from digital companies, Shah also sees opportunities in consumer product companies, particularly smaller companies with strong initiatives. He believes that “over the next few years, consumption will remain relatively resilient,” driven by government initiatives and direct benefit transfers. He highlighted the “Alcobev space” and “beauty and personal care cycle” as potential “stand-out categories.”
Regarding PB FinTech’s diversification into healthcare, Shah stated that he doesn’t see it as a major issue. While acknowledging that “the market sentiment is not the best right now,” he believes that the allocation is within the management’s stated ceiling and that it doesn’t pose a “structural headwind to their medium to long-term growth plans.”
Companies in the digital sector, including Nykaa, Paytm, Zomato, and PB FinTech, have seen sharp stock corrections, with some dropping as much as 30-45%. However, Shah believes these companies are strong long-term bets. Unlike traditional businesses, digital platforms remain insulated from global risks like tariffs and currency devaluation. With a focus on domestic markets, they have the potential to sustain double-digit growth in the coming years.
For the full interview, watch the accompanying video
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