ICICI Pru’s house view – which has been very cautious in recent quarters – is becoming a little more constructive at the margin, driven by evidence that demand resurgence on the back of Government measures is continuing to look strong even after the festive season.
Indian market has been an underperformer in 2025 and earnings growth continues to be weak though its getting better at the margin. Underperformance, under allocation by FIIs and a gradual growth recovery can besetting up the base for better markets in the coming quarters – with the only caveat that continuing supply of issuances can soak up incremental demand for stocks.
ICICI Pru’s flexicap fund has posted a strong top quartile 1 yr performance driven by overweight positions in key consumer discretionary stocks in the auto and consumer services sectors and underweight position in IT services.
Rajat describes his style as bottom-up driven with a growth bias and believes in buy-and-hold as a portfolio philosophy – which shows up in a low portfolio turnover ratio for the fund. The fund has been about 35% allocated towards mid and small caps over 2025 vs 27% in the benchmark.
The fund has been maintaining a large overweight position in autos through the year. Its top holding in this space – TVS Motors – has been a key holding for some years now while its more recent addition of Maruti Suzuki was a bet on revival of demand in small cars – which happened sooner than anticipated with the GST cuts.
The fund has been underweight financials – in part due to valuation and cyclicality concerns on capital market stocks and in part due toa cautious earnings growth outlook for large banks. Rajat is now cutting his underweights in large banks but prefers to remain out of capital market stocks.
Looking into 2026, Rajat sees IT services and banks as potential outperformers. His dark horse pick for 2026 is cooling businesses – AC manufacturers – who bore the brunt of a mild summer in 2025, setting themselves up for potential revival in 2026.