R&D‑Driven Manufacturing as a New Frontier
During the Moneycontrol Mutual Fund Summit, Chandraprakash Padiyar, Senior Fund Manager at Tata Asset Management, underscored a shift in the Indian equity landscape. He noted that, for the first time in his 26‑year career, he is encountering companies that genuinely invest in research and development. Padiyar cited an engineering‑manufacturing firm that files two patents every week, illustrating the depth of innovation in the sector.
He also highlighted that several Indian listed companies are either the largest or second‑largest globally in their respective businesses. "There are enough companies which are either top second largest or the largest in the world in their businesses that we are aware of," he said. However, he cautioned that management projections can be overly optimistic, especially in the auto‑ancillary space where growth claims are common.
Long‑Term View Amid Short‑Term Bias
Padiyar argued that the prevailing short‑term orientation among investors opens a window for managers willing to adopt a longer horizon. "If we can take a long‑term view, buy and hold good quality management with good quality balance sheets," he said. This approach, he believes, will help capture the true potential of R&D‑heavy manufacturers.
Diversifying Active Strategies
Rishi Kohli, Chief Investment Officer at JioBlackRock Mutual Fund, broadened the discussion beyond market‑cap categories. He stressed that active portfolios can diversify across fundamental and systematic active styles. "Fundamental active and systematic active are also two ways to diversify within active," Kohli explained.
Kohli’s research, conducted in partnership with BlackRock, identifies three primary sources of alpha: stock selection, sector rotation and style/factor tilting. He urged investors to look beyond size and consider these dimensions when building an active equity strategy.
Implications for Investors
The conversation points to a growing niche where active managers can differentiate themselves by focusing on manufacturing firms with proven R&D capabilities and global market standing. By pairing a long‑term buy‑hold philosophy with a diversified active framework, investors may capture value that is not immediately visible through traditional market‑cap lenses.
What to Watch
- The emergence of new active funds that specifically target R&D‑intensive manufacturing. - Continued disclosure of patent filings and R&D spend by listed companies, which can serve as a proxy for future growth. - Shifts in management commentary that may signal genuine versus inflated growth expectations.
These developments will shape how active managers allocate capital in the coming fiscal years.