HDFC Value Fund has delivered a 300 bps alpha over Nifty500TRI over the last 3 years despite value as a factor seeing some headwinds in the last couple of years after a strong run in the 2021-2023. Financials (lending as well as non lending) have been the biggest contributors to this alpha, followed by a large telecom company.
Anand says his portfolio is divided into 3 segments. The first is relative value – stocks trading cheap relative to markets or to their own history or to sector.
The second category is absolute value – stocks that are true “value” plays in the conventional sense of the term.
The third is stocks at inflection points – on growth, margins or capex – all of which can significantly boost earnings and returns. These could also include turnarounds. This is the bucket where risk-reward is highly favourable.
Turnaround / inflection point sectors in this portfolio include PSU banks – which are seeing strong growth in earnings – which he sees continuing into 2026 and value retail – which he says are at an inflection point, given the big consumption thrust that the Government has embarked on.
He likes IT services – large as well as midcaps. He sees valuation comfort, high dividend yields and strong cash flows in large caps while mid and small cap IT stocks in his portfolio are poised for strong business growth.
He has also invested in domestic IT platforms in the jobs space as well as companies in the commercial offices space that are seeing strong demand from ITES / GCCs.
He sees consumer staples as both relative value as well as contra.
2026 could see financials and consumer discretionary continue to do well. His contrarian picks include IT services and consumer staples – which he expects can surprise to the upside in 2026.