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Check out the 4 Sectors that PMS Managers are Betting Big on

High net-worth people in India have been increasingly using Portfolio Management Services (PMS), which provide a customised approach to wealth management. Given India’s rapidly expanding sectors and changing economic environment, PMS managers are carefully allocating capital to high-growth industries. Notably, four industries are attracting a lot of attention and accounting for over half of PMS funding: financial services, healthcare, technology, and green energy.

These industries, which gain from strong changes in the economy, digital innovation, the development of healthcare, and sustainability initiatives, are in line with India’s projected growth trajectory. PMS managers are arranging their portfolios to take advantage of long-term development prospects in the Indian market as they place significant bets on these industries.

What is Portfolio Management Service (PMS)?

An assortment of a variety of financial securities, such as stocks, assets, government and mutual funds, business bonds, other instruments in the money market, money market instruments, digital currencies, and commodities, alongside bank certificates of deposit, can be categorised as investments. These securities are purchased with the hope of earning a return, a boost in value, or both. So, the skill of developing and maintaining these portfolio assets is referred to as Portfolio Management.

Portfolio management seeks to minimise market risk while meeting investors’ long-term financial goals within the allotted time frame. Professionals who offer these management services are referred to as portfolio managers. They are knowledgeable in portfolio construction, current market conditions and expectations, willingness to take risks, and diversified investment. On the other hand, those who possess such information are able to independently supervise and manage the portfolio.

Building and managing a portfolio of investments to achieve the highest possible return within the allotted period is what makes portfolio management a continuous process rather than a one-time event. It may be thought of as an ongoing cycle that includes building the right portfolio, diversifying, supervising, and allocating security.

Based on a SWOT analysis, portfolio managers evaluate the advantages and disadvantages of different investment plans as well as the market possibilities and threats they present to help investors reach their financial goals.

Influence of Portfolio Management Services (PMS) in India

When constructing the portfolios of their customers, fund managers that provide Portfolio Management Services (PMS) usually favour a bottom-up strategy. They start by selecting equities and then move on to other metrics like sectoral potential.

Finding the appropriate stocks has shown to be crucial in producing larger profits. In addition, PMS fund managers take into account the industries that those companies are a part of and assess how the changing macroeconomic environment may affect their portfolios.

The four industries where the PMS had a sizable allocation were financial services, healthcare, capital goods, and autos. Approximately 49.5% of the assets under management (AUM) in the PMS business were located in these sectors as of August 31. These industries are highlighted in the combined data that fund managers feel have bright futures.

Financial Services: India’s Expanding Financial Infrastructure

As of the end of August, financial services accounted for 22.6% of the AUM of the PMS industry, making it the most preferred sector. Fintech businesses, stock broking, insurance, non-banking financial companies (NBFCs), asset management companies (AMCs), and banks in both the public and private sectors are among its subsectors.

Although issues like slower credit growth and margin compression impact the whole banking industry, focussing specifically on wealth management firms, NBFCs, and private banks is a well-rounded and growth-oriented strategy, according to Nirav Karkera, Head of Research at Fisdom.

According to Karkera, private banks are showing excellent financial performance, with minimal non-performing assets (NPAs), significant lending growth, and enhanced asset quality.

Certain non-bank financial institutions (NBFCs), especially those operating in specialised sectors like microfinance and housing finance, are still essential in providing credit to underprivileged populations. The growing wealthy middle class in India is also driving up demand for wealth management firms. According to Karkera, these companies are taking advantage of the growing popularity of digital platforms and more financial literacy to provide individualised, technologically advanced investment solutions.

Capital Goods: India’s Manufacturing and Infrastructure Boom

The second-most favoured sector amongst the PMS was capital goods, with a 12 per cent allocation. Many portfolio managers have a preference for the capital goods sector since it encompasses sectors like construction, manufacturing, and heavy machinery, according to Ravi Kumar TV, Director of Gaining Ground Investment Services. According to Kumar, this industry often performs best during periods of economic boom, particularly in the middle to late stages.

The government places a high premium on capital expenditures (capex), investing heavily in expanding the nation’s manufacturing and infrastructural networks. The requirement for capital goods is driven by growing company and corporate profitability. The Reserve Bank of India (RBI) is expected to cut interest rates in the upcoming months, which has investment managers optimistic. By making this change, the cost of borrowing money for these businesses to fund significant improvements in equipment and machinery will be lower.

An additional boost will be provided to help industrial production once global commerce kicks up. As a result of the government’s strong emphasis on capital expenditures, the industry has a bright future, Kumar said.

Healthcare: India’s Position as a Global Pharma Hub

Following a dismal 2022 performance, pharmaceutical and healthcare companies have performed nicely over the following 15–18 months. Due to increased chronic illness incidence, rising care costs brought on by disposable incomes, and deeper insurance penetration, the Indian healthcare sector has experienced tremendous expansion.

According to Tradejini’s Chief Operating Officer, Trivesh, India has emerged as the world’s leader in healthcare tourism due to its ability to provide top-notch healthcare at reasonable prices. Not only does India provide highly modern medical facilities, but its cost is also a factor drawing in patients from all over the world.  More individuals can access high-quality healthcare services because of rising earnings and improved insurance coverage.

According to Trivesh, PMS managers have shown more interest in this industry as a result of realising its potential for long-term growth. As of August 31, PMS has an 8.7% allocation to the sector.

Automotive Sector: PMS Managers Profit from Sturdy Demand

Due to a resurgence in demand, new product introductions, and steady raw material costs, the majority of auto stocks have performed strongly over the last year. The BSE Auto index increased by 67% throughout the previous 12 months.

 6.2% of PMS’s assets are earmarked for the sector. Funds are being systematically allocated to this industry by PMS managers. They are placing a large bet on the structural growth narrative, which is supported by the possibility of both exports and domestic consumption. According to Trivesh, the sectoral prognosis is still positive notwithstanding a few temporary hiccups.

The luxury vehicle category is seeing a noticeable increase in demand as many buyers have more money to spend. The premium segment’s sales are being driven by a trend towards quality, according to Divam Sharma, Founder and Fund Manager of Green Portfolio PMS.

The demand has increased due to increasing financial resources and a growing inclination towards luxury automobiles. India’s manufacturing centre for international auto players has been established by government efforts like ‘Make in India,’ Trivesh said, adding that the country’s exports have increased.

To Wrap Up

In line with India’s changing economic environment, Portfolio Management Services (PMS) managers are placing strategic bets on important industries including financial services, technology, healthcare, and green energy. Digital transformation and financial inclusion propel financial services, while fast breakthroughs in AI and software benefit technology. The pharmaceutical industry is seeing expansion, mostly due to India’s growing involvement in global supply chains. Furthermore, there is a lot of promise in capital goods and autos, which are being helped by the growth of infrastructure and the transition to electric vehicles. By dedicating over half of their capital to these areas, PMS managers are setting themselves up for sustained expansion in line with India’s development path.

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