About ITUS

Investing in growth in the public markets

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Owner's Manual

Owner's Manual

We are a fiduciary of your capital. Your understanding of what we do and how we will approach it is a critical element in enabling us to attain our goal. The Owners Manual helps achieve this....

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Performance Overview

The fund has consistently demonstrated exceptional performance since inception. A ₹1 crore investment 7.5 years ago has grown to ₹4.2 crore, significantly outperforming the benchmark index, which would now be worth ₹3.18 crore. In 2024 alone, the fund delivered a net return of 12.8%, thus delivering a since inception IRR of 19.63% after fees, compared to the benchmark’s IRR of 15.5%.

The fund’s consistent outperformance is a result of a disciplined approach to sectoral allocation and careful bottom up stock selection.

Key Contributors and Portfolio Insights

Healthcare: The standout sector for 2024, benefiting from both overweight allocation and robust stock selection.
FMCG: Despite weak performance in the broader market, rural-focused holdings in this sector provided positive returns.
Auto and Auto Components: Exposure was reduced from 23% in September 2023 to 6% by December 2024, focusing on two-wheelers. However, not holding key performers within the sector detracted from returns.
Banks: We have been underweight banks barring our largest exposure in ICICI Bank. Though we do not see RoA expanding in 2025, the sector could be a defensive positioning for the year considering relative opportunities.

The fund is nearly fully deployed, with 3% held in cash to capture tactical opportunities.

Market Trends and Opportunities

Volatility as a Feature, Not a Bug
Volatility, especially in the latter half of 2024, underscored the importance of maintaining a long-term perspective. Historically, significant market corrections (>13%) have happened twice over a 20 year period ( looking at a 1 year horizon) and often present opportunities to deploy capital strategically. The fund’s allocation strategy focuses on sectors and companies with strong earnings visibility, ensuring resilience during market fluctuations.

Earnings Narrowing in 2025
Over the past three years, earnings growth has been broad-based across sectors. However, this trend is expected to narrow in 2025, making focused stock selection increasingly important. Sectors like healthcare, power, FMCG and non-lending financials are positioned as key drivers of portfolio growth.

Portfolio Positioning

The portfolio remains well-diversified across large-cap (47%), mid-cap (32%), and small-cap (12%) companies, with sectoral exposure reflecting a blend of growth and defensive themes:

Healthcare: Overweight due to favorable domestic and international trends.
Consumer Staples and Discretionary: Focused on rural recovery and rising disposable incomes.
Non-Lending Financials: Targeted investments in asset management and insurance companies.
Power and Renewables: Companies positioned for capacity expansion in line with rising demand.
Metals: Introduced as a counter-cyclical theme for 2025.
Emphasis remains on companies with strong fundamentals, sustainable growth drivers, and the ability to navigate economic challenges.

Key Insights and Flow Dynamics

India’s Rising Global Relevance
India’s increasing weight in the MSCI All Country World Index highlights its growing prominence among global investors. Despite near-term outflows from Foreign Institutional Investors (FIIs), long-term participation remains a key growth driver.

Sectoral Shifts in Domestic Flows
Thematic funds and mid- and small-cap funds attracted significant inflows in 2024. Multi-cap allocations, traditionally a cornerstone of equity investments, have seen reduced participation. This shift underscores changing risk preferences among domestic investors. We believe an increasing focus on risk as a characteristic of 2025.

IPO and QIP Activity
IPO activity was diverse, with 23 sectors contributing to 2.9% of the total market capitalization. QIP issuances hit a record high, driven by large-cap companies raising capital for growth and deleveraging.

Structural Trends

The ongoing shift in market participation, with increasing domestic investment replacing traditional FII dominance, mirrors transformative equity market trends seen in the U.S. (1990–2000) and China (2003–2014). This structural change positions India for a strong equity decade, with domestic participation expected to drive long-term market stability and growth.

Outlook for 2025

At Itus, we remain optimistic about 2025, identifying volatility as an opportunity rather than a challenge. While small- and mid-cap valuations are elevated, risk management and security selection in terms of businesses who can expand margins should help protect downside in the year. Increased exposure to large caps, coupled with targeted investments in sectors like healthcare, FMCG, and power, ensures a balanced approach to risk and reward.

At Itus, we are committed to delivering long-term value by maintaining a disciplined investment approach, leveraging insights into market trends, and positioning for sustainable growth. With a strategic mix of sectoral allocations and bottom-up stock selection, the portfolio is well-positioned to navigate the challenges and opportunities of 2025.