Why Old Bridge's Kenneth Andrade is avoiding IT despite attractive valuations
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- Kenneth Andrade of Old Bridge Mutual Fund says Indian markets have been range-bound since the September 2024 highs, with earnings growth stuck in single digits from 2023-2026, but he expects double-digit earnings growth by the end of this financial year — the first time in roughly three years
- Old Bridge holds zero exposure to IT despite valuations being the most attractive in many years, citing automation disruption, uncertain pricing on a constant-currency basis, and the difficulty of pivoting companies that employ between 200,000 and 600,000 people to new technologies
- Andrade is overweight pharmaceuticals, framing the upcoming patent cliff — roughly $750 billion in innovative drugs losing protection between now and ~2035 — as a ~$70 billion addressable opportunity for Indian generic manufacturers leveraging cost and scale advantages
- Old Bridge is overweight automobiles, noting one leading two-wheeler manufacturer recently reported international sales exceeding domestic sales in a quarter, reflecting what Andrade calls the broader direction of Indian auto exporters
- Andrade flags crude oil at $120/barrel — driven by geopolitics — as the single biggest external risk he monitors, followed by rupee stability; current rupee weakness has boosted exporter earnings through improved volumes and realizations
- Old Bridge is underweight banks, lending institutions and parts of insurance, arguing household leverage remains elevated and per capita income growth hasn't been strong enough to drive a consumption revival
- Old Bridge's Focused Fund holds around 23 stocks and the Flexi Cap Fund around 35, with identical sector positioning across both; the firm has no plans to launch new schemes over the next 12-24 months
Why it matters: Andrade's positioning defies the obvious value trade: he is sitting out IT — the cheapest pocket of Indian large-caps — because AI-driven automation has eroded earnings visibility, while concentrating on pharma ahead of a structurally documented $750 billion patent cliff. The rupee tailwind underwriting his earnings recovery call reverses if the currency stabilizes, and his single biggest named risk — $120 oil — would hit India's import bill and corporate margins simultaneously.
