There aren’t extreme pockets of froth on one side and a deep value on the other, he said in an interview. “Now, returns will largely depend on earnings growth…”
There was consolidation over the last year with earnings growth coming below expectations, but recent policy measures should revive consumption, which is a key growth pillar, said Munot, who manages over ₹7.5 trillion in assets at HDFC AMC. “The festival season has shown optimism, and with government capex and eventual return of private capex, we could see a broader-based recovery and improved earnings growth in the coming quarters.”
Prior to HDFC AMC, Munot spent years shaping the industry at SBI Funds Management, Morgan Stanley and Birla Sun Life Mutual Fund.
Munot, who grew up in Beawar, Rajasthan, said he began buying stocks out of curiosity when he was 11 years old. When one of his IPO picks jumped, the excitement did not just fade. That kept him hooked.
“It was the LML Vespa IPO back then. You had to wait months to get a scooter, and we thought the company would do well if there was such a demand for the product,” he told Mint. “I think it listed at ₹60-70 against the IPO at ₹10. And the interesting part is that the company didn’t survive for long.”
It was more about learning than truly understanding investing or creating wealth, he said.
Edited excerpts:
You started investing at 11—could you share how that journey began and what your first investments were?
It was the LML Vespa IPO back then. You had to wait months to get a scooter, and we thought the company would do well if there was such a demand for the product. I think it listed at ₹60-70 against the IPO at ₹10. And the interesting part is that the company didn’t survive for long.
Growing up in Beawar, Rajasthan, our window to the world was radio and newspapers. The English newspaper would arrive a couple of days late, and a Gujarati bi-weekly ‘Vyapar’ gave insights into different businesses and markets. We used to listen to the BBC to track global events. My father used to say, “Read more, meet more”. Also, develop an interest in just observing prices: har price kuch kehta hai. Why prices moved, not only of stocks but everything, and always dig into the story behind them.
This curiosity extended to geopolitics. For example, volatility in the market due to conflicts like the Falklands War or geopolitical shifts between the USSR and the USA. We had a very small business in a small town and had absolutely nothing to do with most of these markets. So all this was pure curiosity. I started keeping a diary of global events, trying to connect them to markets.
We didn’t really understand investing at all at the time—it was more of learning than actually creating wealth.
Many investors entered during or after Covid and saw quick gains. How do you view such investors, and what would you advise them now that markets may stay muted for a while?
You are right, a large number of investors entered the market over the last few years, especially post-Covid, and saw higher returns in a short period than long-term averages. Until around September 2024, one-year returns were in the 30–40% range, and even two-year returns were very strong.
This year, however, has been one of consolidation. The market hasn’t delivered much, though mutual funds have done relatively better. Investors understand now that equity returns aren’t linear, volatility is an integral part of the market, and staying disciplined with a long-term view is key.
Nifty’s one-year return is around 5-6%, small caps are marginally down, but two-year returns are still 15–20%, and three- to five-year returns would be 20-25% per annum.. So, a pause was inevitable. Valuations had run ahead of fundamentals, narratives had overtaken numbers, and we have gone through a healthy phase of time and mild price correction.
What do you make of the valuations now? Do you think it’s still expensive?
We’ve seen a time correction in the market. After a strong growth in earnings for three consecutive years, this year it has been in the single digit. Nominal GDP growth itself is in the single digit. Policy measures should help and I expect a broad-based recovery ahead. Large-caps are reasonably valued, while midcaps are trading at higher than the long-term average. Small-cap is a large universe and looking at average index valuation may not be the best way to look at it. One notable difference this time is that corporate leverage is at its lowest point, so balance sheets are in very good shape. With other markets performing better, relative to other emerging markets, India’s valuation premium has come down.
Nifty has underperformed all global markets. With Trump imposing new tariffs on China, how does India feature in the investment playbook?
The global economy is going through major changes—geopolitical realignment, technological changes, particularly AI as a transformational force and demographic shifts. Many countries, like China, are ageing rapidly, while India has the advantage of a young population. While the developed world has excessive leverage, balance sheets are in good shape in India. Tariffs will have a marginal impact as India explores other markets while trying to boost domestic consumption.
From a long-term perspective, India is well-positioned; it has political, social, macroeconomic and financial stability. Over the past year, other markets like the US, China, Japan and in fact, both MSCI World and MSCI Emerging Markets have performed far better than India. India had a couple of years of exceptional performance before and is now in a period of consolidation. India offers excellent long-term opportunities, even as foreign investors have been selling.
Do you see FIIs turning into net buyers of Indian equities in the new Samvat year?
I think so. While AI is the most transformational force humanity has seen, the whole AI trade in the stock market is moving towards getting overextended. Eventually, investors will start looking beyond it. In the US, a small cohort of stocks has done well mainly as an AI play. Similarly, it is in China, Japan, Korea and Taiwan where investors are chasing similar themes.
India has historically been the best adopter of technology. Look at our Digital Public Infrastructure, and look at the way we have transformed from the most ‘data poor’ to the most ‘data rich’ society in a decade at such low cost. While others invested billions to build capabilities like fibre, network, and the internet in the 90s, India has benefited by adopting those technologies effectively. The same could happen with AI—traditional businesses as well as new ones here could leverage AI for structural gains.
How do you see the outlook for Indian equities? Do you expect the subdued momentum to continue, or could triggers like earnings growth lift the market from here?
Over the last year, the market has been consolidating, with earnings growth coming below expectations. But recent policy measures—personal income tax relaxation, GST cuts, RBI liquidity support and rate cuts—should revive consumption, a key growth pillar. The festival season has shown optimism, and with government capex and eventual return of private capex, we could see a broader-based recovery and improved earnings growth in the coming quarters.
How do you see gold and silver performing ahead? Do you think that there could be a time price correction there as well?
Momentum in gold and silver has been very strong over the past couple of years. We have been recommending investing via ETFs and gold funds. But the power of asset allocation should not be underestimated, and one should not extrapolate past returns–50% gains of this year can’t be repeated every year. The current rally reflects people’s fear of global uncertainties, low institutional allocation, and central bank buying, a partial vote against the dollar. Yet, history reminds us that gold and silver can underperform for long periods; for example, Gold was in a long bear market for 20 years between 1982 and 2002. So, while gold can do well on worries about US debt or geopolitical situation, allocation is key. Don’t put all your money into gold and silver at these prices.
Do you see any value in any sector now?
Earlier, valuation dispersion was very high—some businesses traded at very high valuations, while others were much lower. That gap has now narrowed. So, there aren’t extreme pockets of froth on one side and a deep value on the other. Now, returns will largely depend on earnings growth, and investors need to focus on what they’re paying today versus the durability and sustainability of those earnings.
The government needs funds and will have to push divestment. Do you think Indian markets have enough depth to absorb large issuances like LIC?
Every month, about ₹29,000 crore enters markets through SIPs, nearly $40 billion a year. Add EPFO, other pension funds, insurers, individual investors, and family offices, and domestic inflows are massive. Foreign investors may have been net sellers recently, but India’s structural appeal remains intact. Other markets and the global AI boom have drawn capital, but when that trade shows signs of reversing, money can rotate back to India, where both the long-term macro story and bottom-up opportunities still hold.
Global investors earlier loved India for two reasons—structural growth and a deep pool of high-quality businesses with strong governance, capital efficiency, and world-class management. Now there’s a third dimension, steady domestic flows. This reduces volatility, improves risk-adjusted returns, and makes India less vulnerable to global sentiment. Earlier, if global markets sneezed, India caught a fever; now it is different. Yes, foreign investors may still chase AI-led markets like the US, Korea, China, Taiwan, or Japan. AI is transformative but, like the internet boom, in the stock market, it will lead to excesses and corrections. India could ultimately be a net beneficiary, using global tech investments, solving for scale with beneficiaries including many traditional businesses.
Any books that have left a deep impression?
There is incredible wisdom in scriptures, whether Jain Agams or the Bhagavad Gita. From the Western world, Meditations by Marcus Aurelius is my all-time favorite. Its philosophy beautifully resonates with Indian scriptures. If you’re rooted in Indian spiritualism, you can relate to Stoicism too.
Gandhi is another. I’ll read as much as possible about him. I truly believe future generations may not believe someone like him lived.
Even in investing, many lessons from the scriptures apply. The biggest enemies of investors are greed and fear. When you read Mahavira or Buddha, you learn how to be dispassionate. And, of course, legends like Charlie Munger, Benjamin Graham, and others have shared timeless, invaluable wisdom that everyone must read. I think it’s important to read more of history, psychology and evolutionary biology than investing books alone.
