Abhishek’s dark horse sector picks for 2026 are quite contrarian: IT services and renewable energy, and he lays out his thesis for his bullish stance on both sectors.
Earnings recovery is visible in the last 2 quarters over the previous 2 – earnings downgrades trend has been arrested, 2/3rd of top 500 companies have reported earnings in line or above expectations in the last quarter.
A short term earnings growth slump should not take away from the fact that discretionary consumption, financialization and exports will continue to be mega trends that can guide long term investments – even as one constantly recalibrates once positions based on evolving market dynamics.
Abhishek is managing HSBC Flexicap Fund with a more flexible allocation strategy than many peers – he typically allocates 50-55% to large caps and 45-50% to mid and small caps.
He gives himself elbow room of benchmark weight +/- 500bps to determine sectoral allocations. This ensures that while the big sectors get reasonable allocations from a risk management perspective, he can afford to be a lot more benchmark agnostic with smaller sectors, in the quest for alpha. Active share in this portfolio is around 55%.
At the margin, he has been adding positions in NBFCs and materials sectors while taking profits from capital goods stocks.
While 3 yr and 5 yr fund performance remains in top quartile, the last one year has been challenging on performance for this fund. Abhishek says his higher allocations to small caps – which bore the brunt of the Jan-Mar 25 correction and sub-optimal allocations in materials and consumer spaces were a drag on performance.
HSBC India Export Opportunities Fund – the other fund that Abhishek manages – has managed to keep its head above water in a very challenging year which has seen tariff upheavals for merchandise exports and multiple disruptions for IT services.
50% of this fund is invested in export oriented businesses and the other 50% looks at more domestic opportunities. Exposure to US markets is about 20% of the portfolio (including merchandise and services) –of which around 40% is exposed to tariff uncertainties (so, 8% of overall portfolio).