Responding to a question on whether the coming year will be driven more by bottom-up stories amid a “strong getting stronger” narrative, Bhasin said, “As I said in the beginning, we are in the middle of this cycle where the market actually goes through a tug of war of fragmentation versus concentration.” He pointed out that while smallcap and midcap earnings growth of 14–15% has excited investors, valuations remain stretched, with trailing 12-month multiples hovering around 38–40 times.
That, however, does not shut the door on opportunities. “It does not mean that every smallcap or midcap would not perform,” he noted, adding that this is precisely where portfolio managers earn their stripes. According to Bhasin, institutional investors who stayed invested in mega-cap names across IT, telecom and oil & gas over the past year have seen relatively steadier performance.
Looking ahead, he expects the next 9–12 months to remain a stock picker’s market, with largecaps offering better downside protection than broader segments. Within IT too, the preference is for select names where earnings revisions are likely to be more contained. “So again, not the whole pack but three or four selective companies to be overweight within the sector,” he said, citing Infosys and Tech Mahindra among preferred choices.
MSME push: Credit and hiring as key proxies
The government’s renewed thrust on MSME expansion could create a multiplier effect across sectors, but Bhasin believes investors need to be clear about the most direct beneficiaries. “One of the biggest proxies is that as the MSMEs can now hire more people, perhaps the government gives them more support, credit appears to be the first proxy,” he said.
Regional banks and NBFCs that lend to MSMEs could be early winners as these enterprises expand capacity and explore both domestic and export markets. Hiring-linked plays also stand to gain. “Info Edge, Naukri business is a direct beneficiary of that,” Bhasin said, pointing to rising non-IT hiring trends.
Value consumption could benefit over the longer term, but near-term enthusiasm may be tempered by rich valuations. “In the near term I would say next one year, two-and-a-half year it helps MSME lending companies and companies like Naukri,” he added.
Premium vs value: Balance is key
On whether portfolios should tactically rotate out of premiumisation into value consumption, Bhasin struck a balanced note. Portfolio construction, he said, depends heavily on the size of assets being managed and liquidity constraints. While several value plays are relatively small and illiquid, larger names such as Trent or Titan offer scale.
He agreed that a mix makes sense. “A balance of one or two good premium plays and a balance of one or two good value plays,” he said, while flagging a preference for FMCG staples over discretionary consumption over the next year.
Earnings risk lingers for discretionary
Asked if earnings downgrades are largely behind the sector, Bhasin was cautious. “I do not think so for discretionary,” he said, pointing to recent cuts in estimates, especially in urban-dependent consumption. In contrast, he sees relatively lower earnings risk in FMCG names compared with discretionary peers.
Defence theme: Valuations still a concern
Bhasin’s scepticism on the defence theme remains intact. “I would disappoint myself by saying no, actually it remains the same,” he said when asked if his view had changed since July. While acknowledging the long-term promise of themes like defence, EMS and renewables under the ‘manufactured in India’ push, he warned that valuations and execution risks cannot be ignored.
Dependence on government orders, delays in land acquisition, and slower-than-expected order fulfilment remain key concerns. Recent moves by the government to introduce more competition in sectors dominated by a few players suggest a rethink even at the policy level. “They are also thinking that we need to reduce our dependence upon one or two or three companies in a particular sector,” Bhasin said.
