According to Shridatta Bhandwaldar, chief investment officer-equities at Canara Robeco Asset Management Company, investors chasing strong recent performance in small- and mid-cap stocks risk overlooking the valuation cushion emerging in large caps. As reported by The Economic Times, Bhandwaldar remains constructive on equities after Nifty 500 earnings growth exceeded 15% in the first quarter of FY27, marking a revival after an 18-month earnings downcycle. The earnings improvement has been driven by strong credit growth and surplus liquidity in the system, with large, mid and small caps all showing delivery of double-digit growth in the last quarter. Bhandwaldar emphasizes that value in markets is available in all parts of the market today if one takes a 2–3-year view, noting this is a far more bottom-up market as against sectoral.
Despite recent outflows favoring small-cap funds, Bhandwaldar emphasizes the strong merit in not ignoring large caps given their margin of safety. According to the interview with The Economic Times, while large caps offer a stronger margin of safety, any meaningful rerating will require earnings acceleration in heavyweight sectors such as banking, information technology, FMCG and oil and gas. The challenge lies in sectors like large banks, IT, FMCG, and oil and gas that have lacked earnings acceleration over recent quarters, which needs to change for meaningful large cap recovery. As reported by The Economic Times, a few large cap sectors like large banks, IT, FMCG, O&G have lacked earnings acceleration over last few quarters - that needs to change for meaningful large cap recovery.
As reported by The Economic Times, Canara Robeco's approach remains agnostic to market cap and focused on individual ideas from a margin of safety perspective. The fund's portfolio allocation includes 46% in large caps, 40% in mid caps and 11% in small caps, with mid-cap valuations having expanded over the past 5 years but backed by relatively stronger earnings growth. Sectors offering opportunities include financials, automobile, consumer discretionary, quick commerce platform companies, retail, hotels, telecom, aviation, pharma, and manufacturing, while manufacturing and industrials require careful evaluation given limited margin of safety. The scheme is predominantly placed in domestic themes like consumer discretionary and consumer services, financials, and hospitality, with underlying businesses showing superior earnings growth profiles. Structural and contextual opportunities exist in consumer tech and platforms, auto ancillaries, capital market plays, NBFCs, hotels, hospitals, EMS, and power equipment value chain sectors.
According to the interview with The Economic Times, the fund's investment thesis focuses on domestic themes like consumer discretionary and consumer services, financials, and hospitality, with underlying businesses showing superior earnings growth profiles. Bhandwaldar notes that while the economy has entered the current geopolitical environment with strong fundamentals, sustained higher energy prices could increase strain on macros and earnings downgrades. The fund looks at the next 12-18 months from a two perspective - corporate earnings growth and impact of geopolitics through higher energy prices on the Indian market. As reported by The Economic Times, very high energy prices, hospitality disruptions, very high inflation and interest rates can impact near term for the scheme. The fund aims to deliver risk-adjusted outcomes through cycles by focusing on quality and growth longevity of underlying businesses.
