Trimming PSU stock positions gradually: Anish Tawakley, ICICI Prudential Mutual Fund

economictimes.indiatimes.com:

With PSU stocks rallying non-stop amid heavy buying by retail investors, Anish Tawakley, Deputy CIO – Equity, ICICI Prudential AMC, says his team has turned cautious on the PSU space since the start of 2024 due to valuation concerns and have been gradually trimming PSU holdings.

“Over the past three years, PSUs have moved from being one of the cheapest segments in the market to a situation where some of the PSUs are today overvalued. This has been largely possible owing to the good work done by the PSU managements coupled with the way the government has ensured that these companies worked in the interest of the shareholders,” Tawakley says. Edited excerpts from a chat with the fund manager:

ICICI Prudential Business Cycle Fund has outperformed in the last 3 years by nearly doubling money. These 3 years have been very interesting because many cycles came and went. How did you manage to thrive in the shifting cyclical landscape?
Anish Tawakley: Three years back the economy had spare capacity and was experiencing weak demand.

This started to change post COVID as demand started to recover. At a fundamental level, there were two drivers of the recovery. One, the real estate cycle started to turn – home sales picked, builder inventories came down and then new project launch activity kicked in.

Second, monetary and fiscal policy became more supportive of growth. We have always felt that homebuilding is fundamental to both employment creation and broader demand generation. So when we saw the real estate cycle turning we took a positive view on the domestic cyclical sectors (capital goods, automobiles, cement, insurance and asset management companies).