While market technicals including huge supply have caused a sell-off, there are fundamental factors too at play that are contributing to nervousness.
CAD is deteriorating on the back of tariff-driven weakness in exports and gold-driven rise in imports. This coupled with continuing weakness in FDI and FII flows is putting pressure on the currency. Tepid earnings growth is not helping sentiment.
That said, large and mid caps are now posting earnings in line with expectations – small caps continue to see some pressure.
We have spent more than a year in a sideways move, valuations are getting cheaper, earnings recovery though gradual is in the right direction, consumption has received a sizeable boost and FIIs are now underweight India. Time to get incrementally more constructive on markets.
FY27 earnings are expected to grow 13-15% on the back of expected recovery in IT services and banking – two index heavyweights.
Canara Robeco Midcap Fund has completed 3 years recently, with CY24 and CY25 doing much better than CY23, thus delivering an in-line performance vs peer group average. Shridatta emphasizes that the last two years have seen the fund outperform its benchmark in terms of returns as well as drawdowns – which is a core part of the AMC’s strategy.
The portfolio comprises leaders and challengers in diverse sectors, all of which have strong growth trajectories with sound capital efficiency and return profiles.
Consumer discretionary remains a key overweight in the fund.
While Shridatta is positive on financials, he is underweight in this fund as some of the largest midcap financials are not businesses he sees much structural upside in. He is wary of considering weaker franchises as his view is that they are pricing in significant credit growth – which may not happen at quite the pace the market is expecting.
Defense and power transmission/distribution continue to be his favourites among industrials while renewables are coming off this list as the sector is now seeing low entry barriers induced overcapacity.