Edited excerpts from a chat:
After 1.5 years of no returns, how attractive is the market looking now?Over the last 18 months, the market has largely gone through a phase of consolidation rather than wealth destruction. This period has helped correct some of the excess valuations that had built up earlier, particularly in pockets of the broader market. From a long-term perspective, such phases are healthy because they allow earnings to catch up with prices. As we look ahead, corporate earnings in India remain structurally strong, supported by improving balance sheets, a revival in capex, and domestic consumption. Therefore, while near-term volatility may continue, the market today appears far more balanced than it did a year ago, which improves the risk-reward for long-term investors.As per Bloomberg data, Nifty 50 earnings over the last five quarters demonstrate significant volatility rather than a consistent trend. After steady growth through Q4 FY25 and Q1 FY26, earnings experienced sharp swings—a dramatic +27.6% surge in Q3 FY26 followed by an equally severe -24.8% decline in Q4 FY26. This volatility reflects sectoral divergence: commodity sectors (oil & gas, metals) drove growth, while financials remained weak with compressed margins. The underlying earnings quality appears fragile, with consensus expectations being downgraded amid strained topline growth and narrowing margins across India Inc.
Amid global macro uncertainty, how is The Wealth Company Mutual Fund positioning its equity portfolios to navigate this environment while maintaining long-term return potential?At The Wealth Company Mutual Fund, our investment philosophy is anchored in a combination of top-down and bottom-up stock selection, with a strong emphasis on earnings visibility, balance sheet quality, and good governance. Given global uncertainties ranging from geopolitical developments to interest rate cycles we are focusing on businesses that demonstrate resilient cash flows, scalable growth models, and prudent capital allocation. Our portfolios maintain a diversified approach across sectors and market capitalisations that are likely to benefit from India’s structural growth story, along with some tactical investment opportunities during these volatile times. The idea is to remain invested in companies that can compound earnings over multiple years rather than attempting to time short-term macro cycles.What is your take on small cap stocks? Are they attractive now? Is valuation still a concern?Small caps have witnessed significant interest over the past few years, and as seen many times before, valuations in certain pockets had moved ahead of fundamentals. However, the recent correction and consolidation have helped bring valuations closer to long-term averages in several segments. It is important to remember that the small-cap universe is extremely diverse. The decline has not been uniform across stocks, as they have varied strengths and growth potential, many of which are now available at better valuations. For long-term investors, small caps continue to offer an opportunity to participate early in the growth journey of emerging companies, provided investments are made with a disciplined, research-driven approach and a sufficiently long-term horizon.Which sectors of the market do you think are in a sweet spot of reasonable valuations and high growth as we step into FY27?As we move into FY27, we see interesting opportunities across sectors aligned with India’s structural economic drivers. Areas such as manufacturing and industrials particularly those benefiting from the capex cycle and supply chain diversification remain attractive. We also see opportunities in select financial services, capital markets, tech-enabled businesses, niche consumption themes, and export-oriented businesses gaining global market share. Within the broader market, several emerging companies in these segments fall within the small- and mid-cap space, reinforcing our belief that bottom-up stock picking can generate meaningful long-term alpha.
If you had to prepare a portfolio afresh at this stage for an investor with moderate risk appetite and risk horizon of 4–5 years, how would you split it between gold and silver, equity and debt?For an investor with a moderate risk appetite and a 4–5-year horizon, diversification remains essential. A balanced allocation could look something like 65–70% in equities, 15–20% in debt, and 10–15% in precious metals dominated by gold as a hedge against macro uncertainty. Within the equity allocation, investors should ideally have exposure across large caps for stability and small and midcaps for growth potential. This combination helps balance volatility while still allowing participation in India’s long-term growth opportunity.
What would be your advice to investors who entered small cap funds recently but are either sitting with no returns or at a loss?We understand the concerns investors are experiencing. Small caps are inherently more volatile in the short term but have historically been rewarding over longer horizons. Periods of muted returns or temporary drawdowns are not unusual. If the investment horizon remains long term, it is generally advisable to stay invested rather than react to short-term market movements. In fact, systematic investing during corrections often improves long-term outcomes. The key is patience and allowing underlying business earnings to play out over time.
What is your take on IT stocks? Are the valuations too attractive now or the AI doomsday scenario is for real?The IT sector has been undergoing a period of recalibration due to global economic uncertainties and prolonged decision-making cycles for discretionary spending. As a result, valuations in several companies have corrected from earlier highs. While the near-term outlook depends on global demand conditions, the long-term structural drivers remain intact. Technologies such as AI, cloud, and digital transformation are likely to expand the opportunity set rather than diminish it. Selective opportunities exist, and many companies are adapting their business models to capture emerging trends.
Broadly, what is your outlook of the market for FY27?India continues to stand out as one of the most compelling long-term growth stories globally, supported by favourable demographics, policy continuity, and an ongoing investment cycle. While markets may see intermittent volatility due to global developments, the underlying earnings trajectory of Indian corporates remains encouraging. From a medium- to long-term perspective, we remain constructive on equities especially within the broader market, where emerging companies are well-positioned to benefit from India’s economic expansion. For disciplined, patient investors, FY27 could present meaningful opportunities to build long-term wealth.
