After being cautious on markets through the 2ndhalf of 2024, Aniruddha turned positive from February 2025 as a confluence of positive monetary and fiscal policies coupled with resumption of Government spending set the base for the economy to come out of its cyclical slowdown.
While earnings growth in large caps is still muted, he sees several pockets within small caps where earnings are rebounding smartly and where valuations are in line with earnings growth (PEG of 1 or less).
He prefers PEG over comparison of PE vs its history, as PEG captures current earnings momentum. On PEG basis, he rates small caps as most attractive followed by large caps and then midcaps.
With a bullish market view and growth clearly visible in several small cap pockets, Aniruddha believes its time to invest confidently into small cap growth focused stocks rather than remaining in the perceived safety of large caps with weak earnings momentum.
He believes long only alt funds are a better format for a pure small cap exposure over open ended mutual funds as they give managers greater flexibility to run more concentrated high conviction portfolios and also go down the cap curve into microcaps in search of alpha without worrying too much about immediate liquidity.
PGIM India Equity Growth Opportunities Series II Fund –the AMC’s small cap focused alt fund – has a basket of 30-35 growth focused stocks that collectively are expected to deliver 28-30% earnings growth in FY26and a similar number in FY27. Priced at a PEG of 0.86, Aniruddha is very comfortable about valuations of the stocks he owns in this portfolio.
He likes select industrials, is bullish on chemicals, agro chemicals and cement, and sees commercial vehicles and their ecosystem as a dark horse pick for FY26.