Latest news with #SorbhGupta
Economic Times
05-07-2025
- Business
- Economic Times
Sorbh Gupta explains why it's a good time to look at smallcap stocks
Tired of too many ads? Remove Ads Edited excerpts from a chat: The market seems to be inching towards new record highs, but are we pricing in too much hope and too little risk? Where do you think we are in the cycle? You've launched a smallcap fund NFO when many smallcaps are still licking their wounds from the brutal correction that began last year. What makes you positive at this stage on smallcaps? Tired of too many ads? Remove Ads How do you separate turnaround stories from value traps? Especially in a space where promoter pledges and poor governance often go unnoticed until it's too late? Everyone talks of forensic filters and governance frameworks. What's your team's actual red flag checklist when it comes to smallcaps? Tired of too many ads? Remove Ads Which sectors or themes within small caps are looking mispriced to you right now and what's your favourite contrarian bet? What is going to be the diversification strategy in the Smallcap Fund? How many stocks would you want to own in a typical market phase without over-diversifying but spreading risk across counters? Despite the recent rally in smallcaps , a deeper dive reveals a tale of two markets. While headline numbers suggest exuberance, Sorbh Gupta , Head-Equity at Bajaj Finserv AMC , points to a more nuanced reality: nearly two-thirds of small-cap stocks remain significantly beaten down from their this conversation, Gupta explains why this divergence creates a fertile ground for active stock pickers, how his team's forensic approach weeds out value traps, and which emerging sectors offer the most compelling opportunities in today's small-cap markets are approaching record highs, earnings are also moving higher. We believe there is a cyclical recovery, which should push corporate earnings growth higher. During the initial phase of the upcycle, some stocks may appear expensive. However, as growth catches up, these stocks become attractive. We believe that at this stage, the market is neither completely cheap nor expensive. Following the correction between September and March, several pockets of valuation comfort have emerged. Within these, one can find quality businesses with reasonable valuations and strong growth outlooks for building a decent equity universe for small caps includes companies with a market cap above Rs 2,000 crore, giving us an extended universe of around 900 stocks. As of May 31, out of those 900, nearly 600 companies were down more than 25% from their 52-week highs. So, while there are concerns that small-cap levels are elevated, there's a long tail within the category that hasn't you look at the Nifty Small Cap 250 index and track the bull market that began around the Silicon Valley Bank crisis, the index has doubled since then. This index spans 52 industries, of which only 17 have outperformed the index, while 35 have underperformed and have recorded lower returns in comparison to the index. It's a fairly level market and a heterogeneous one at that. It's a good environment for active stock selection. This is the near-term reason why I believe this is a good time to look at small caps and curate a decent active does 'value' mean in your smallcap universe? Low PE stocks that come within the parameters of quality and growth appear to be value, in our small-cap universe, we refer to companies trading below their intrinsic value. These are often businesses where the long-term growth outlook remains intact, but near-term mispricing creates an opportunity. In some cases, even quality companies with strong growth potential may appear optically expensive on a price-to-earnings basis. However, the market may be underestimating their ability to scale, expand market share or deliver higher return on for us, any stock trading below its intrinsic value qualifies as a value opportunity; however, only after passing through our filters of quality and small caps space, we believe the most important part is eliminating rather than selecting. Our holistic approach towards careful stock selection helps us filter out the best of the best. So, we eliminate at the first level. The first level of quality comes as forensic research, where we'll eliminate bad management, with a bad track record on related party transactions and those that have litigation we come to the quality, growth, and value triangle. That is, the quality of the business, the industry growth it offers, and the valuation it is available at. Among these, the most sacrosanct is quality. Once we test for quality in terms of governance and fundamentals, then we look at the business's ability to gain market share and maintain profitability, growth, return ratios, and capital efficiency. Lastly, we assess value versus growth, looking at the have built an internal forensic team. Out of the 900 stocks we see from the small-cap broader universe, there is a strong list of eliminations that we'll do based on the forensic analysis that we perform. As part of this, we will conduct extensive data-based checks, examine related party transactions, go through auditors and auditor reports, assess who the bankers are, and review other regulatory filings of the company. This allows us to filter out companies where we don't want to we begin with this first level of negative screening, and then move to the positive, where we look at quality, value, and growth. There we will take a look at the quality of the business, the growth that it offers and the industry growth along with the valuations it is available are seeing opportunities emerging in small caps that are unique to the segment. Over the last three to five years, new industries have emerged due to government reforms, technology, and structural changes. These naturally lack large-cap representation since the sectors themselves are still these, the defence looks like a great opportunity, though we have to be careful and selective because valuations have gone through the roof in some cases. Similarly, opportunities in power equipment are opening up, with the government planning significant investments over the next five to seven years. which opens up a space. The online marketplace space is gaining momentum. That opportunity was never there seven or eight years ago. Also, electric vehicles, a space that did not have investable opportunities earlier, now represent a growing I mentioned, any company with a market cap of more than ₹2,000 crore is part of our broad universe, which includes close to 900 small caps. From there, we filter. We are looking at anywhere between 40 to 100 stocks. The plan is to be quite well general view in the market is that the Q4 earnings season was relatively better for midcaps rather than smallcaps. What is the kind of earnings growth that you are expecting from small caps in general in FY26?So far in FY26, we've seen easing monetary policy, rate cuts, higher liquidity, and earlier tax reductions. All of these developments support a cyclical recovery in the Indian economy. This should begin reflecting in corporate earnings going medium-term equity outlook appears positive, particularly for the broader caution is advised in export-oriented sectors due to U.S. economic uncertainty and potential tariff impacts. Geopolitical risks may also cause intermittent the economy picks up, smaller businesses and broader market participants tend to benefit. The small-cap space, especially after the recent correction, looks promising with bottom-up opportunities. Investors may consider quality small-cap funds to tap into long-term growth.
Time of India
05-07-2025
- Business
- Time of India
Sorbh Gupta explains why it's a good time to look at smallcap stocks
Despite the recent rally in smallcaps , a deeper dive reveals a tale of two markets. While headline numbers suggest exuberance, Sorbh Gupta , Head-Equity at Bajaj Finserv AMC , points to a more nuanced reality: nearly two-thirds of small-cap stocks remain significantly beaten down from their peaks. In this conversation, Gupta explains why this divergence creates a fertile ground for active stock pickers, how his team's forensic approach weeds out value traps, and which emerging sectors offer the most compelling opportunities in today's small-cap landscape. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like If you have a mouse, play this game for 1 minute Navy Quest Undo Edited excerpts from a chat: The market seems to be inching towards new record highs, but are we pricing in too much hope and too little risk? Where do you think we are in the cycle? While markets are approaching record highs, earnings are also moving higher. We believe there is a cyclical recovery, which should push corporate earnings growth higher. During the initial phase of the upcycle, some stocks may appear expensive. However, as growth catches up, these stocks become attractive. We believe that at this stage, the market is neither completely cheap nor expensive. Following the correction between September and March, several pockets of valuation comfort have emerged. Within these, one can find quality businesses with reasonable valuations and strong growth outlooks for building a decent portfolio. You've launched a smallcap fund NFO when many smallcaps are still licking their wounds from the brutal correction that began last year. What makes you positive at this stage on smallcaps? Live Events Our equity universe for small caps includes companies with a market cap above Rs 2,000 crore, giving us an extended universe of around 900 stocks. As of May 31, out of those 900, nearly 600 companies were down more than 25% from their 52-week highs. So, while there are concerns that small-cap levels are elevated, there's a long tail within the category that hasn't performed. If you look at the Nifty Small Cap 250 index and track the bull market that began around the Silicon Valley Bank crisis, the index has doubled since then. This index spans 52 industries, of which only 17 have outperformed the index, while 35 have underperformed and have recorded lower returns in comparison to the index. It's a fairly level market and a heterogeneous one at that. It's a good environment for active stock selection. This is the near-term reason why I believe this is a good time to look at small caps and curate a decent active portfolio. What does 'value' mean in your smallcap universe? Low PE stocks that come within the parameters of quality and growth appear to be rare. By value, in our small-cap universe, we refer to companies trading below their intrinsic value. These are often businesses where the long-term growth outlook remains intact, but near-term mispricing creates an opportunity. In some cases, even quality companies with strong growth potential may appear optically expensive on a price-to-earnings basis. However, the market may be underestimating their ability to scale, expand market share or deliver higher return on equity. Altogether, for us, any stock trading below its intrinsic value qualifies as a value opportunity; however, only after passing through our filters of quality and governance. How do you separate turnaround stories from value traps? Especially in a space where promoter pledges and poor governance often go unnoticed until it's too late? In small caps space, we believe the most important part is eliminating rather than selecting. Our holistic approach towards careful stock selection helps us filter out the best of the best. So, we eliminate at the first level. The first level of quality comes as forensic research, where we'll eliminate bad management, with a bad track record on related party transactions and those that have litigation issues. Then we come to the quality, growth, and value triangle. That is, the quality of the business, the industry growth it offers, and the valuation it is available at. Among these, the most sacrosanct is quality. Once we test for quality in terms of governance and fundamentals, then we look at the business's ability to gain market share and maintain profitability, growth, return ratios, and capital efficiency. Lastly, we assess value versus growth, looking at the risk-reward. Everyone talks of forensic filters and governance frameworks. What's your team's actual red flag checklist when it comes to smallcaps? We have built an internal forensic team. Out of the 900 stocks we see from the small-cap broader universe, there is a strong list of eliminations that we'll do based on the forensic analysis that we perform. As part of this, we will conduct extensive data-based checks, examine related party transactions, go through auditors and auditor reports, assess who the bankers are, and review other regulatory filings of the company. This allows us to filter out companies where we don't want to invest. So, we begin with this first level of negative screening, and then move to the positive, where we look at quality, value, and growth. There we will take a look at the quality of the business, the growth that it offers and the industry growth along with the valuations it is available at. Which sectors or themes within small caps are looking mispriced to you right now and what's your favourite contrarian bet? We are seeing opportunities emerging in small caps that are unique to the segment. Over the last three to five years, new industries have emerged due to government reforms, technology, and structural changes. These naturally lack large-cap representation since the sectors themselves are still new. Among these, the defence looks like a great opportunity, though we have to be careful and selective because valuations have gone through the roof in some cases. Similarly, opportunities in power equipment are opening up, with the government planning significant investments over the next five to seven years. which opens up a space. The online marketplace space is gaining momentum. That opportunity was never there seven or eight years ago. Also, electric vehicles, a space that did not have investable opportunities earlier, now represent a growing ecosystem. What is going to be the diversification strategy in the Smallcap Fund? How many stocks would you want to own in a typical market phase without over-diversifying but spreading risk across counters? As I mentioned, any company with a market cap of more than ₹2,000 crore is part of our broad universe, which includes close to 900 small caps. From there, we filter. We are looking at anywhere between 40 to 100 stocks. The plan is to be quite well diversified. The general view in the market is that the Q4 earnings season was relatively better for midcaps rather than smallcaps. What is the kind of earnings growth that you are expecting from small caps in general in FY26? So far in FY26, we've seen easing monetary policy, rate cuts, higher liquidity, and earlier tax reductions. All of these developments support a cyclical recovery in the Indian economy. This should begin reflecting in corporate earnings going forward. The medium-term equity outlook appears positive, particularly for the broader markets. However, caution is advised in export-oriented sectors due to U.S. economic uncertainty and potential tariff impacts. Geopolitical risks may also cause intermittent volatility. As the economy picks up, smaller businesses and broader market participants tend to benefit. The small-cap space, especially after the recent correction, looks promising with bottom-up opportunities. Investors may consider quality small-cap funds to tap into long-term growth.
Time of India
03-07-2025
- Business
- Time of India
NFO Update: Bajaj Finserv Mutual Fund launches small cap fund
Bajaj Finserv Mutual Fund has launched Bajaj Finserv Small Cap Fund , an open-ended equity scheme predominantly investing in small cap stocks, that offers quality, growth and value. The fund is open for subscription and will close on July 11. Also Read | Record inflow of over Rs 15,000 crore in May. What is making arbitrage mutual funds gain investors' interest? Best MF to invest Looking for the best mutual funds to invest? Here are our recommendations. View Details » Bajaj Finserv Small Cap Fund is designed for investors aiming to build long-term wealth by investing primarily in equity and equity-related instruments of small cap companies, according to a release by the fund house. The recent correction in small caps presents a compelling entry point for long-term investors. Even though over 80% of small-cap companies have posted strong profit growth of 38% and solid return ratios, most of them are still trading 15–45% below their 52-week highs. Live Events This recent market correction has opened up a clear gap between the true value of these companies and their current market prices, said the release. Coupled with structural tailwinds such as the 'Make in India' push, rising formalisation, and digital transformation across sectors, small caps are well-positioned to benefit disproportionately in the next growth cycle, making this an attractive investment opportunity. The equity portion of the fund will be managed by Nimesh Chandan , CIO and Sorbh Gupta, Head - Equity, and the debt portion by Siddharth Chaudhary , Head – Fixed Income. The minimum application amount is Rs 500 (Plus multiples of Re 1), with a minimum additional application of Rs 100 (Plus multiples of Re 1). An exit load of 1% is applicable if the investment is redeemed within six months of the date of the allotment. The fund offers both growth and IDCW (Income Distribution cum Capital Withdrawal) options. 'The launch of the Small Cap Fund reflects our deep conviction in the long-term potential of India's dynamic small-cap universe. Small caps typically exhibit higher volatility than broader indices, underscoring the importance of active management in navigating market fluctuations and identifying quality opportunities,' said Ganesh Mohan , Managing Director, Bajaj Finserv AMC. 'The strategy is built around discovering high-quality companies in the early phases of growth that are positioned to outperform over time. With the recent small cap correction, the NFO is poised to take advantage of this golden opportunity, enabling investors to participate in long term wealth creation as these businesses scale and contribute meaningfully to the economy,' he added. Also Read | JioBlackRock launches mutual fund access on MyJio, calls it a new era of investing Bajaj Finserv Small Cap Fund is well-suited for those looking to benefit from the growth potential of fundamentally strong businesses that are currently trading below their intrinsic value. It also appeals to investors who want to diversify their portfolios by adding small-cap stocks with growth prospects. The fund is benchmarked to the BSE 250 SmallCap Index TRI. 'Our new small cap fund will be a portfolio of quality businesses with scalability that trade below their intrinsic value. Many industries and subsectors are available exclusively in the small cap category. In essence, there are opportunities to pick up leaders in emerging businesses and challengers in others from this small cap space,' said Nimesh Chandan, Chief Investment Officer, Bajaj Finserv AMC. 'The NSE small cap 250 Index is almost flat year on year. However, many companies generated strong profit growth last year. This allows us to invest in those small cap companies at valuations lower than last year after this time correction,' Nimesh Chandan added It goes beyond selecting quality stocks by rigorously filtering out companies with weak governance, inconsistent fundamentals, or financial red flags. This disciplined approach narrows the universe of over 1,100 small-cap stocks to a focused set of high-potential businesses. A key part of the process is our internal forensic and risk-aware analysis, which filters out companies with weak governance or financial red flags. From a universe of around 300-400 small-cap stocks, this disciplined approach narrows the selection to a portfolio of 40– 100 carefully chosen businesses
Time of India
29-04-2025
- Business
- Time of India
Largecaps remain attractive amid global volatility and tariff uncertainty: Sorbh Gupta
"It is a domestic oriented story. 60% of GDP is domestic, least impacted by tariff , and much better valuation especially on the largecaps, all these things put together are working in favour of allocations to India and that is what we are quite nicely buying from FPI in Indian equities and that is clearly supporting the markets and the resilience that you talked about," says Sorbh Gupta , Bajaj Finserv AMC. Tell us, one of the major factors that is really contributing to this resilience in the market, we did see the two-day drawdown on the back of sentiment, but we have started moving up yet again, so that resilience has really aided by a renewed FII interest in Indian markets. In fact, we have been seeing almost 32,400 crores worth of buying in the last eight sessions by the FIIs. Now, given what is playing out in the US, the underperformance by US market, also the moderation in in the US dollar index and the bonds, is the FII interest in India likely to sustain and provide a cushion for the markets going ahead? Sorbh Gupta: Oh, absolutely, we saw $30 billion of selling. Our valuation comfort improved much better than other peer groups, emerging markets and developed markets, over the last six months. And the way whole tariff things have shaped up from a safe heaven perspective, a domestic oriented story plus valuation comfort plus least impacted by tariff, all these things put together I am sure people who moved out in a hurry from India in terms of FPI flows towards maybe US or China are clearly looking back at India. It is a domestic oriented story. 60% of GDP is domestic, least impacted by tariff, and much better valuation especially on the largecaps, all these things put together are working in favour of allocations to India and that is what we are quite nicely buying from FPI in Indian equities and that is clearly supporting the markets and the resilience that you talked about. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Play War Thunder now for free War Thunder Play Now Undo But help us understand that amidst this market which are the sectors that you are overweight on and which are the sectors which are not giving you that much of a confidence and you do not have much of a positive stance there. Sorbh Gupta: So, very clearly, we have oriented our portfolios towards more domestic consumption. There are multiple triggers plus valuation comfort that are lined up there. This includes discretionary and staples. So, the portfolio allocations in terms of overweight are towards domestic consumption in the next three-six months with multiple triggers like tax rebate starting to play out in people's hand from April onwards, plus a good monsoon, rural pickup, all these things put together shall support domestic consumption. The portfolio allocation has moved towards more of domestic consumption including banks. Banks are beneficiary of domestic economy doing well. So, banks is also one of them. We are also positive on pharma, not necessarily generic US exporter but more towards crams and domestic pharma, so that is a pocket we are very positive upon. Live Events We are positive on insurance. We are clearly underweight it or any other export-oriented businesses which gets impacted because of US slowdown, so that is one pocket we are a little underweight over there, so that is the broad allocation, more tilted towards consumption, more of healthcare but healthcare domestic oriented or crams not US generic necessarily and underweight it. We are still looking at some triggers for growth in autos. So, we are careful on autos, very-very selective. We are still not seeing a lot of growth, but hopefully as economy recovers, domestically things should play back on autos, but we are still an underweight on autos. Also, talk to us about the small and the midcap space. Despite the considerable correction that we have seen, do you have valuation comfort because some of the names are still trading at a premium. So, how do you view that space because that is where really where the wealth generation happens as far as the small and the midcaps are concerned and investors would like to know that at this juncture is the smid space really still at a premium and it is a wait and watch before you actually park your funds there? Sorbh Gupta: Yes, absolutely. If you had asked me this question six months ago, I would clearly say that there is a lot of froth and please stay away from mid and smallcaps. But over the last six months what we have seen is though broad based at a blanket level I can always say that still valuations are uncomfortable relative to largecaps, but clearly some pockets of comfort have started to emerge over last three months in midcaps and smallcap space also. So, some quality names, some pockets where valuation comfort has emerged those pockets one can take a contrarian call where triggers are lined up and we believe one has to be a bit more selective, but compared to what was maybe in September, October situation is better in terms of valuation comfort in mid and smallcap, so maybe some things can be picked up from mid and smallcap space also, not a blanket trade right now from a valuation comfort, on a blanket trade perspective largecaps are still better placed, but yes, some pockets of comfort have started to emerge in mid and smallcap also for us and that is where we are looking at, but not a blanket trade mid and smallcaps, It is not a blanket call on SMIDs, but tell us what are these pockets of comfort for you then? Sorbh Gupta: So, one should look at chemicals. Chemicals is a space where some triggers are lined up, valuation comfort is there, a lot of companies have completed their capex. So, we believe that is one pocket one should look at. Auto ancs is also one pocket where valuation comfort has emerged. Again, a lot of capex companies have completed, waiting for an upcycle in demand. So, people might have to wait. It can be a bit of a contrarian call, but valuation comfort has emerged, not much downside, so these two pockets clearly are emerging as very good. As I talked about crams space. So, within crams space, there are some good high-quality midcaps and smallcaps on the pharma crams where one should look at. So, these are clearly pockets where valuation comfort has increased. We clearly see some triggers lined up over the next three, six, nine months to be invested in these companies and, of course, not to leave alone cement . Cement is also one pocket we are very bullish, both largecaps and smallcap. We believe this year demand should be good, pricing power should come back in cement, so that is also one sector even in the smallcap space you can look at.
Time of India
22-04-2025
- Business
- Time of India
Indian stocks should beat both US and China markets: Bajaj Finserv AMC's Sorbh Gupta
The noise around the market because of the US tariffs and global geopolitical risks has increased, and that is resulting in a lot of volatility. However, we are sticking to our process InQuBe, where when we analyze the fundamentals of companies, we have our internal quant team, which helps us via various quant screeners Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Pointing out that FII outflows in the last 6 months and the resultant valuation correction offer comfort to global investors, Sorbh Gupta , Senior Fund Manager – Equities, Bajaj Finserv AMC , says the growth differential between India and other larger economies should increase. "So Indian equity should outperform from here on compared to US or China equities," he excerpts from a chat:The noise around the market because of the US tariffs and global geopolitical risks has increased, and that is resulting in a lot of volatility. However, we are sticking to our process InQuBe, where when we analyze the fundamentals of companies, we have our internal quant team, which helps us via various quant screeners. And also, last but not least, we have within our investment process something called a behavioral edge, which helps us understand and benefit from market biases much better. So all these things are ensuring that we are looking at the longer term and not getting swayed by the near-term noise. As far as portfolio tweaking is concerned, in June-July of last year, when midcaps & smallcaps were clearly showing signs of frothy valuations, we reduced that exposure purely on recent market correction in equity is offering a good opportunity of investment for long-term investors. We are focusing on the quality of business and valuation comfort. We are also looking at long-term tailwinds emerging for various businesses & sectors, which we call megatrends. To create a portfolio from a medium-term perspective, we believe investors in equities should have portfolios that have domestic consumption, domestic healthcare, large cap tilt, and quality as key attributes in the generally don't take cash calls. We look for opportunities to buy good businesses at fair valuations. The recent correction offers such opportunities. More in large cap space and fewer in mid & small caps as believe in FY26 domestic-oriented sectors, especially mass consumption, and companies focusing on rural consumption should do well. Even domestic pharma is the space that could do well. The domestic also includes financials, which we are keenly looking at. So overall, companies on domestic growth, domestic consumption, and benefiting from the uptake in domestic demand is something that we are looking at very said earlier, all the domestic-focused businesses are better placed compared to businesses that are focusing on global growth and the Global economy. Within IT and pharma, we believe IT can face a little more higher headwinds if the global economy slows down. Pharma is a defensive play, but the noise around tariffs on pharma is something that can keep the sector volatile. We will assign a low probability of very high tariffs on pharma because of the importance of the product to the local populace. But as I said earlier, domestic-focused businesses, including financials, are something one should keenly look at this juncture in the should understand that the US and China, both put together, are more than 40% of global GDP, and if they enter into tariff wars, the whole global growth could slow down, so there could be an impact on India also. However, the FPI outflows in the last 6 months and the resultant valuation correction offer comfort to global investors. Also, the growth differential between India & other larger economies should again increase. So clearly our view over here is that Indian equity should outperform from here on compared to US or China is very difficult to pinpoint one single factor that drives equity returns. I believe some of the very important factors definitely would be the dollar index, most risk assets are quoted in USD. So, it is a very important metric to watch out. Bond yield both in the US and India is something that we are looking at very closely as it represents the risk free is the earnings growth that drives equity returns over a long period of time. So, Q4 earnings are important. More so, management commentaries on FY26 business outlook will be very important from the companies.
