Earnings slowdown phase is giving way to an acceleration phase – FY27 should see earnings growth back in double digits at 14-15% and this should sustain for next couple of years driven by favourable fiscal and monetary policies. Earnings delta should drive markets going forward.
SBI Flexicap Fund has made a significant change in fund strategy: from 2022 to 2024, it was earlier an analyst-driven fund with sectoral allocations in line with benchmark.
In light of the sub-optimal performance of this strategy, the fund since the last 12+ months has started taking active sector bets, has pruned the portfolio from 110+ stocks to around 60 and is now co-managed by two fund managers – Dinesh Balachandran and Anup Upadhyay rather than being an analyst driven fund.
Results of the strategy change are now becoming visible – the fund posted a 2nd quartile performance for the last 1 year and top quartile for the last 6 months.
Anup has been continuing to cut positions in consumer staples even when GST cuts have come in – high valuations, tepid growth and increased competition are key concerns that keep him away from this sector.
Financials – the largest allocation in the fund – delivered a mixed bag of results in 2025. Stock selection in large banks detracted from performance while that in non lending businesses contributed well.
Anup took a tactical call to increase allocation in an IT major when it got beaten down significantly – which has worked out well for the fund.
Although small and midcaps have underperformed significantly in 2025, Anup does not expect rotation in 2026 – he sees large caps continuing to outperform as valuation differentials are still in their favour.
His sector winner bets for 2026 include financials, auto, metals and cement.