‘Growth is coming back’: Pankaj Tibrewal says patient investors can earn double-digit returns

“From a valuation perspective, two years back, the ground reality was quite bad, but stock prices were going up, so markets were divorced from reality then,” he added. Earnings recovery underway Tibrewal pointed to early results from India’s top 500 companies to argue that the earnings cycle has turned. In what he described as the most challenging quarter, corporate India delivered more than 20% growth in profit after tax.

“Now, till yesterday, 165 companies have reported out of the top 500 companies in India. The revenue growth is a four-year high at 22%, and the PAT growth is 25%,” he said. For Tibrewal, the contrast with two years ago is stark. Then, investors were paying high multiples for businesses with limited track records while earnings growth remained weak. Now, he argued, earnings are improving even as prices and sentiment remain subdued.

“This is more painful because it’s been a grinding market. It’s all part of the cycle,” he said. Double-digit returns possible Despite the weak mood, Tibrewal said investors with a two-to-three-year horizon could reasonably expect returns broadly in line with earnings growth. “I firmly believe that if one is patient for the next couple of years, getting a double-digit return in line with earnings growth should not be a great difficulty,” he said.

He contrasted today’s caution with the euphoria of two years ago, when market participants were predicting the Nifty 50 would reach ₹1 lakh or ₹1.5 lakh. “Today, 26,000 also looks to be a great distance,” he said. The next India beyond metros Tibrewal’s second major argument was that the next phase of Indian wealth creation may not be concentrated in the country’s largest cities. He urged investors to look beyond headline indices and examine entrepreneurial activity in smaller urban centres.

“Go to the ground level and see the entrepreneurs’ energy. We can say nothing is happening in India, but look at Bangalore. Look at Tier-2 and Tier-3 cities,” he said. He cited an IPO pipeline of about 80 companies over the next 12 months, saying 50 to 60 of them are expected to come from Tier-2, Tier-3 and Tier-4 cities rather than metros. “I think that’s the next India. You have to go down at the bottom level and pick up companies which can create that value over the next 5-10 years,” Tibrewal said.

Active management matters Tibrewal also defended active fund management in a market where headline index returns have disappointed. “In the last two years, we have debated how markets have not made money. But look at some of the active managers and the amount of alpha which they have created,” he said. His message to investors was that the absence of broad market returns does not mean the absence of opportunity.

Instead, he said, the coming phase may reward those willing to identify companies early, particularly outside the usual metro-centric investment universe.