Markets are critically dependent on pick up in earnings growth and jury is still out on the pace of this expected pick up.
Valuations in large caps are mildly expensive, more pronounced in mid and small caps. While valuations are not giving comfort, quality of balance sheets are a source of comfort, as is the structural decline in inflation.
Consumption is gradually increasing, capex is moderating and global challenges persist. One needs to be a lot more stock specific in this environment to generate alpha.
Canara Robeco Large & Midcap Fund came back strongly to post a top quartile performance over the last 1 year as the portfolio got sharpened to focus more on winners and let go some erstwhile winners which were being given a long rope.
Clear focus on superior earnings growth led to significant overweight in consumer discretionary stocks and sizeable underweight in IT and FMCG – calls that helped drive performance over the last year.
Within consumer discretionary, selection of stocks exhibiting market share gains and earnings growth momentum across diverse businesses including auto, auto ancillaries, retail, hotels, EMS etc was a key contributor to performance.
Shridatta reiterates the need in this current environment to be extremely stock specific in approach – a playing field he says is ideal for stock pickers like his team.