Quest Investment Managers' CIO Rakesh Vyas sees strong growth potential in consumer discretionary, telecom, and mid-sized lenders. The strategy centers on long-term trends like formalization and expected tariff-led margin expansion, while advising caution regarding macro headwinds like inflation and policy delays.
Rakesh Vyas, Chief Investment Officer at Quest Investment Managers, has outlined a portfolio strategy focusing on consumer discretionary, telecom, and specific segments of the banking sector. The approach emphasizes shifting toward businesses that can capitalize on long-term structural shifts such as premiumization and the formalization of retail, rather than relying on short-term market movements.
Consumer Discretionary and Retail Outlook
The firm identifies consumer discretionary as a core growth pillar. While consumer staples have often relied on price-led gains, the discretionary segment—encompassing retail, hospitality, and organized food delivery—is viewed as having more robust, sustainable demand driven by rising disposable incomes. The thesis suggests that companies successfully capturing the shift toward organized, higher-value retail are better positioned for consistent, double-digit growth compared to traditional staples providers that may face saturation or competitive pressures.
Telecom Profitability and Tariff Trends
In the telecom sector, the investment outlook is tied to the anticipated impact of tariff adjustments on profitability. While the timeline for these hikes has faced delays, the expectation remains that operators will eventually implement necessary price increases. These moves are viewed as a critical lever to boost average revenue per user and overall sector profitability. Bharti Airtel is often highlighted in this context, as the firm’s strategy focuses on operators that demonstrate consistent subscriber additions and effective execution, which are essential for maintaining margins even when tariff cycles are delayed.
Banking and Interest Rate Strategy
Turning to the financial sector, the firm points to a specific opportunity among mid-sized lenders. With the interest rate cycle expected to trend higher, banks that hold a larger proportion of repo-linked and external benchmark-linked loans are seen as having an advantage. These institutions may experience faster improvements in net interest margins compared to some large private sector banks. The latter are currently navigating headwinds, such as FCNR (Foreign Currency Non-Resident) deposit structures, which can temporarily limit their flexibility during rate fluctuations. Investors looking at this space may monitor how agile, mid-sized lenders manage credit growth relative to the broader banking system.
Risks and Market Monitorables
While the outlook for these sectors remains positive, investors are cautioned to track several macro and execution risks. Geopolitical uncertainty and volatile crude oil prices remain significant factors that could disrupt raw material costs and inflation, potentially squeezing profit margins across various industries. Furthermore, the reliance on telecom tariff hikes creates a specific execution risk; any further delays in implementation could impact the projected timeline for profitability improvements. Finally, banking sector performance remains sensitive to interest rate volatility, which could influence deposit costs and the overall health of net interest margins.