Badshah explained that these sectors are expected to continue growing at a rate much faster than the broader market. While valuations had previously become excessive, Invesco recognised this but chose to maintain some investments in these areas.
“We were aware of that, and we have continued to hold some of these names because the fact that the pathway to growth and the visibility as far as longer-term growth is concerned, is still much higher than some of these parts of the market,” he added.
Badshah stated that some companies in these sectors are now moving toward more reasonable valuation levels. He suggested that as these businesses sustain strong returns on capital employed (ROCE) and return on equity (ROE) over time, their valuations might settle at the lower end of their historical valuation ranges.
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Drawing parallels with consumer and fast-moving consumer goods (FMCG) stocks, Badshah said that many businesses with strong structural drivers have managed to support their valuations over the long term. He believes the same could apply to sectors like digital commerce and capital market-related businesses, which have robust, long-term growth drivers that should underpin their valuations.
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For the entire interview, watch the accompanying video
(Edited by : Unnikrishnan)