Edited excerpts from a chat:
Given the valuation environment in largecaps today, how are you striking the balance between quality names and growth opportunities in your largecap fund? How attractive are the valuations in largecaps now following a year of consolidation?
Largely, we do not allocate basis market caps but more top down growth themes and underlying growth led bottom up stock picking. But, to our partners and investors we continue to recommend balancing their portfolios in largecaps or flexicap funds.
Which sectors or business models in the largecap universe are you prioritising and which are you avoiding or under-weighting?
We have been overweight on the large BFSI sector over 30% followed by IT, petroleum, construction, telecom and autos. These have done with belief in strong earnings growth in coming quarters and available at reasonable valuations. Our portfolio has been quite broad based in sectoral allocations across and diversifying to good companies across themes. We have also mixed the portfolio with very selected mid and smallcaps in spaces like real estate, consumption, household services and IT hardware.
How are you tweaking your portfolio after the Q2 earnings season? Which sectors look best placed for high earnings growth in CY2026?
We have not made any substantial changes based on last quarter earnings, but with better earnings growth and improving margins and with reasonable valuation – Banking position has been relatively higher. We have included insurance, asset management companies and exited out of a few mid-cap IT names.
Financials comprise around 1/3rd of your portfolio. What’s behind this large overweight stance?
Large banks have under performed broader markets for several years, with better results coming from several banks and guidance on improving NIM’s, lower credit costs and expected uptick in credit growth – out belief is that this sector can out perform in coming quarters.
In between large private banks, small private banks and PSU banks, which one do you think will outperform in 2026?
We are overweight on large private sector banks within which we have one large PSU bank. We are also over weight on financials with several NBFC’s.
Where do you see the thematic opportunities for the next 12–18 months (for example, consumption, financials, infrastructure, data centres)?
We have identified several themes which have potential to deliver higher growth on next 24 months. ‘Manufacturing’ is one large theme with focus of government on Make in India couple with China + 1 story and tax reforms in corporate sector clearly gives a lot of confidence. ‘Consumption’ is another important theme with recent reforms like GST 2.0, TAX slabs rationalised and lower cost of capital has lifted consumer spending and will benefit companies catering to the pent up demand. ‘New Age Digital Companies’ also is one of our top themes from long term perspective. Other themes include Mid-Cap IT, Financials, Healthcare.
2025 has been a washout year for IT. Given the valuations, do you see chances of a reversal next year?
We are still watching for signs of growth revival in the IT sector especially the larger IT companies on the software side. Given slower growth in US, we are seeing lower spends by companies in the tech space and resulting which the guidance from top IT companies is also muted for last few quarters. So, while valuations like compelling we would wait for positive signal on earning recovery and which could be sustained for medium to long term. Although, we continue to be reasonably allocated to MID IT names those who are not necessarily in the software business but focus on areas which are more inclusive and niche in areas of platform, IOTA and cloud computing.
