In a market where recovery is real but fragile, Sankaran Naren — steward of one of India's largest pools of capital — is placing measured conviction in banks, power, refiners, and pharma, sectors he believes have been undervalued by fear rather than fundamentals. His optimism is grounded in genuine earnings improvement across India's largest companies, yet tempered by the knowledge that crude oil and monsoon rains remain forces no fund manager can hedge away. It is the oldest tension in investing: the moment clarity arrives, the horizon shifts.
ICICI Prudential's Naren bullish on banks, refiners, power and pharma despite crude oil risks
You need earnings growing and crude and monsoon comfortable
Mark
So Naren is saying these four sectors are cheap right now. But how cheap are we actually talking about? Is this a "once-in-a-decade" moment or just "reasonably attractive"?
Mimi
The banks are trading at a 20 percent discount to their long-term price-to-book value. That's meaningful, especially after foreign funds pulled $6.5 billion out in March. But Naren isn't calling it a screaming bargain—he's calling it attractive relative to the risk.
Luke
Right, and we should note that "long-term price-to-book" is a backward-looking benchmark. If the long-term average was inflated, then a 20 percent discount to it might not be as compelling as it sounds. We don't know what the intrinsic value actually is.
Mark
Fair point. What about the earnings recovery he's citing? Is that broad-based or concentrated in a few companies?
Mimi
The data shows more than half of the Nifty 50 companies beat profit estimates in their June quarter results. Materials, utilities, and financial services led the turnaround. So it's not just one or two outliers.
Luke
But we're talking about 50 companies out of thousands listed in India. And "beating estimates" can mean beating a low bar. We don't know if earnings are actually growing year-over-year or just beating depressed expectations.
Mark
So the crude oil risk—he says $100 a barrel would compress valuations even if earnings keep improving. How real is that threat?
Mimi
Brent crude is already above $90. It's not hypothetical. And India imports most of its oil, so higher prices feed into inflation, which can pressure both corporate margins and consumer spending.
Luke
True, but we should be precise: the risk is that valuations compress, not that the market crashes. Naren is saying the multiple you pay for earnings might shrink. That's different from earnings themselves collapsing.
Mark
And the monsoon—how much does that actually matter for these four sectors?
Mimi
It matters most for power and pharma indirectly. A weak monsoon hurts rural consumption, which can slow demand for electricity and healthcare services. For banks, it affects loan quality in agricultural regions.
Luke
But Naren didn't quantify any of this. We don't have a sense of how much a monsoon miss would actually hurt these sectors. It's a risk he's naming, not one he's measured.
Der Puls
- Foreign investors fled Indian banks for months, pulling billions and pushing valuations to a 20% discount — creating the kind of dislocation that value investors wait years to find.
- More than half of Nifty 50 companies have now beaten earnings estimates, signaling that India's corporate recovery is no longer a forecast but a fact in progress.
- ICICI Prudential is actively deploying capital into Kotak Mahindra, HDFC Bank, and Union Bank, betting that prolonged foreign selling has handed domestic managers a rare advantage.
- Crude oil has already crossed $90 a barrel — and Naren warns that a move toward $100 could compress valuations even if earnings continue to improve.
- The market's next chapter depends on variables outside any boardroom: whether monsoon rains arrive on schedule and whether global energy prices stay cooperative.
In a market where recovery is real but fragile, Sankaran Naren — steward of one of India's largest pools of capital — is placing measured conviction in banks, power, refiners, and pharma, sectors he believes have been undervalued by fear rather than fundamentals. His optimism is grounded in genuine earnings improvement across India's largest companies, yet tempered by the knowledge that crude oil and monsoon rains remain forces no fund manager can hedge away. It is the oldest tension in investing: the moment clarity arrives, the horizon shifts.
Sankaran Naren, who oversees roughly $123 billion at ICICI Prudential Asset Management, is making a deliberate move into four sectors: banks, oil refiners, power utilities, and pharmaceuticals. His confidence is anchored in something concrete — more than half of India's fifty largest listed companies have beaten profit expectations in their most recent quarters, marking the clearest sign of corporate recovery in months.
Banking is where Naren sees the sharpest opportunity. A sustained wave of foreign selling — including $6.5 billion pulled from Indian financial stocks in March alone — left large-cap lenders trading at nearly a 20% discount to historical valuations. The NSE Nifty Bank index briefly approached bear-market territory before recovering more than 13%, yet the sector remains historically cheap. Naren's own Multi Asset Fund, which has outperformed 95% of its peers over five years, has added positions in Kotak Mahindra Bank, HDFC Bank, and Union Bank of India on the thesis that fear, not fundamentals, drove the selloff.
Beyond banks, rising electricity demand creates a structural case for power infrastructure, while pharma benefits from both competitive export capabilities and steady domestic healthcare growth — a combination Naren has backed for years without wavering.
The broader market has responded: the Nifty is on track for a second consecutive month of gains, foreign inflows are returning, and software stocks have recovered as global investors rotate. But Naren is candid about what could unravel it. Crude above $90 a barrel is already a concern; a move to $100 would likely compress valuations market-wide regardless of earnings. A weak monsoon could suppress rural demand and ripple across sectors. His message is precise — earnings recovery is real, but sustained gains require crude and weather to cooperate. Miss either condition, and even improving profits may not be enough.
Sankaran Naren, who runs India's second-largest asset manager, is placing a deliberate bet on four sectors he believes are positioned to capture the next wave of growth: banks, oil refiners, power utilities, and pharmaceutical companies. His conviction comes as corporate earnings across India show genuine signs of recovery for the first time in months, with more than half of the fifty largest listed companies beating profit expectations in their most recent quarterly reports. ICICI Prudential Asset Management, which oversees roughly 11.8 trillion rupees—about $123 billion—in total assets, with equities comprising more than two-thirds of that sum, is moving capital into these areas with deliberate intent.
Naren, one of India's most respected fund managers and a longtime advocate for value investing, sees particular opportunity in the banking sector. Large-cap lenders have been hammered by foreign investor withdrawals over the past several months, leaving them trading at nearly a 20 percent discount to their historical price-to-book valuations. In March alone, global funds pulled $6.5 billion from Indian financial stocks as part of a broader retreat from the country's equities. The NSE Nifty Bank index fell close to bear-market territory before recovering more than 13 percent in subsequent weeks. Despite that rebound, the sector remains undervalued by historical standards. Naren's own $9 billion Multi Asset Fund, which has outperformed 95 percent of its peer group over the past five years, has recently added positions in Kotak Mahindra Bank, HDFC Bank, and Union Bank of India, betting that the prolonged foreign selling has created genuine entry points.
Beyond banking, Naren sees compelling fundamentals in power and pharmaceuticals. Rising electricity consumption across India is expected to drive substantial investment in generation and transmission infrastructure, creating a structural tailwind for utilities. Pharmaceutical companies, meanwhile, benefit from two distinct advantages: they maintain globally competitive export capabilities while also serving a domestic market where healthcare consumption is growing steadily. Naren has maintained a bullish stance on pharma for years, and he sees no reason to waver. "Pharma has consistently delivered for us," he said in a recent interview. "We continue to find the sector attractive."
The improving earnings picture has helped lift India's benchmark Nifty index toward a second consecutive month of gains. Foreign inflows have begun to revive, and software stocks have recovered as international investors rotate away from semiconductor shares elsewhere in Asia. The momentum feels genuine, built on actual corporate performance rather than sentiment alone.
But Naren is not blind to the risks that could derail this recovery. Crude oil prices have already spiked above $90 a barrel, and he views this as a genuine threat to market valuations. The mathematics are straightforward: if earnings growth continues to improve while macro headwinds intensify—particularly if crude climbs to $100 per barrel—investors will likely assign lower valuations to stocks across the board. The monsoon season also matters. A weak monsoon could pressure agricultural output and rural consumption, dampening demand across multiple sectors. Naren's view is clear: the market needs a specific set of conditions to sustain its gains. Earnings growth must continue, but crude prices and monsoon performance must remain benign. Get one or two of those variables wrong, and even improving corporate profits may not be enough to drive the market higher.
Bemerkenswerte Zitate
Banking remains one of the most attractive sectors in India— Sankaran Naren, ICICI Prudential CIO
If crude goes to $100, the market will assign a lower valuation even as earnings improve— Sankaran Naren, on macro risks to the recovery
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