‘Simple Hai! With Vivek Law ’Podcast’ | Market: A Slave Of Earnings

Saurabh Nanavati, Managing Director and CEO of Invesco Mutual Fund, joined journalist Vivek Law on the Simple Hai! show about India’s evolving investment landscape and the crucial need for financial literacy. In this episode Vivek Law and Saurabh Nanavati discuss how geopolitical shifts are shaping the future of wealth creation in India. Nanavati, known for keeping a low profile, but opened up to Law on various aspects of India’s financial landscape.

Market Dynamics: Earnings & Global Positioning

Drawing on his extensive career with global players, Nanavati reiterated his core market philosophy, “The stock market is a slave of earnings”. He explained that, fundamentally, the market is a discounted cash flow of future earnings. While global events impact India, the market will rally once corporate earnings turnaround, he told Law. This principle explains the current flat market, which Nanavati attributed to weak earnings resulting from an incorrect base that the high growth years of 2022-2023 were actually an overflow from 2020-2021, which was affected by the pandemic.

He affirmed India’s strategic importance by classifying it as one of only five large global markets, alongside the United States, China, Germany, and Japan. India’s underlying index includes 22 sectors, providing fund managers ample opportunity to generate alpha, unlike commodity dependent markets.

Global Interest & Growth Outlook

Nanavati noted a significant shift among large institutional investors who previously grouped India into the “emerging markets” bucket. They are now increasingly demanding a “separate mandate for China and a separate mandate for India” due to the sheer size and opportunity presented by these individual markets. He projects that over the next three years, India is “set to catch up meaningfully” with the US and China.

Structurally, India is in a “sweet spot”. Even without major policy changes, the market will continue to grow at 6%, which is “huge,” with good policies, it can potentially push the growth to 6.5-8%. On the corporate front, Nanavati stated his belief that the “next two quarters might perhaps be weak, but hopefully, after that, growth should start coming back”.

Discussing geopolitical concerns like tariffs, Nanavati suggested that such tough situations might ultimately make India stronger by bringing people and organisations together.

The Challenge of Investor Behavior

Despite India’s success, the industry’s AUM crossing Rs 75 lakh crore and SIPs reaching Rs 28,000 crore per month, a persistent behavioral challenge remains. Nanavati highlighted data showing that while investors staying invested for five years rose from 5% in 2020 to 30% recently, a significant 70% still churn their investments too quickly.

He shared an anecdotal example involving his aunt, who had invested in a fund in 2014 and forgot about it, resulting in the portfolio growing “six and a half times” over 11 years. He observed that the best investors are those who forget their money are the ones invested for a long period.

The Critical Need for Financial Literacy

Nanavati strongly advocated for mandatory financial education in schools, suggesting that “financial literacy should have been taught to 12–13-year-old school kids”. He stressed that this void affects even highly successful professionals, who often struggle to manage their money later in life.

He also addressed the misconception that “Mutual funds are equal to equity,” clarifying that it’s not equity, it covers all asset classes, including debt funds, gold, equity funds, property funds, through AIFs, you can invest in commercial properties as well. This access, combined with low ticket sizes, has reduced the average entry age of investors significantly, with even 18year-olds now starting SIPs.

Active vs. Passive & Investment Advice

Globally, there is a shift toward passive, particularly in the US where alpha is difficult to generate. Institutional investors now often adopt a hybrid approach by keeping “50% of their portfolio in passive” to earn the market return, while allocating the remaining 50% to the best active managers. Therefore, there is a huge differentiation, where the winners take it all, he said.

Meanwhile, Nanavati remains bullish on active management domestically, stating that there are still “10–15 years left in active investing.”

Nanavati emphasises that earnings drive markets and India’s structural strengths position it for sustained growth. As global investors increasingly view India as a standalone opportunity, he urged a shift toward longterm, disciplined investing supported by stronger financial literacy to fully realise the nation’s wealth creation potential

Published on: Saturday, October 11, 2025, 12:41 PM IST