Buy the neglected, trim the celebrated: Sandeep Tandon on his latest portfolio shifts

But the neglected, trim the celebrated: Sandeep Tandon on his latest portfolio shifts

Even as Indian-Pakistan tensions escalate, Sandeep Tandon, CEO of Quant Mutual Fund, he said he remains constructive on the market, with a portfolio tilted towards India-centric themes that are under-owned currently.

"The beginning of 2025, when this Trump-related thing started, we skewed our portfolio towards India-centric companies or India-centric stocks," Tandon said. The allocation favours sectors aligned to the domestic economy: hospitality, infrastructure, power, consumption, pharma, and textiles.

"We are more skewed towards hospitality as a space. We are more skewed towards infra. We continue to remain extraordinarily bullish the power sector as it is a decadal opportunity," he explained. In the consumption space, though, he's selective: "You have to be very choosy out there because nothing is very cheap in that space."

Pharma, particularly US generics, is a space where Tandon is bullish as he sees global indispensability. "There is no substitute for generic drugs globally… whether it's Europe, whether it's US, our generic companies are bound to grow." Even if the US imposes tariffs, "that can be easily passed on," he said. He cites the COVID crisis to underline India’s strength: "India was the biggest beneficiary because we are the drug supplier to the world. We are in a very monopolistic situation. Why not capitalize on that opportunity?"

Contrary to most fund managers who continue to be bullish on large private sector banks, Tandon remains circumspect. "This is a sector which is grossly overrun. If someone has to book profit, this is the area they will book," Tandon said, pointing to the Bank Nifty's recent all-time high. "We have our own thesis of multiple getting deteriorated of the private sector banks."

Tandon critiques the earnings-based valuation model saying that it is unreliable as it relies on forecasts that are based on assumptions that could go wrong. "This whole industry works on people forecasting earnings, which is again based on certain assumptions. So anything based on assumption doesn’t work. That’s why you always have positive or negative surprises."

Quant’s investment process relies heavily on behavioral finance and perception analytics. "We always work on the perception analytics… decoding or quantifying the potential multiple change both in absolute and relative basis," he said. On banks, he noted, "We are seeing the perception is peaking out and hence we are cautious."

He added: "Anything in the admired territory, we tend to avoid. Anything in the neglected or most hated zone, we are buying those snails."

Textiles, for example, stand out for their potential but small size of the sector poses limitation to adding huge positions, he said. "If the US treaty gets settled, Indian textile companies will be huge beneficiaries," he said. "The only problem is the size of the sector is too small. You can’t have a very skewed portfolio because of liquidity issues. But we do have overweight and we still like these names," he said when asked about stocks like Gokaldas Exports and Welspun among others.

Tandon said, he has trimmed positions in defence stocks, which are once again in the limelight now. "In the last few months, we’ve not added any position. Rather, we have cut down and moved towards OMCs (oil marketing companies) and infrastructure players, purely from the valuation perspective."

"I’m not negative on the defense sector, but valuations are relatively stretched. I would prefer to buy other PSU names like OMCs, select power companies… some of these names actually trade in the hated zone."

He emphasised the need to look at risk-adjusted returns. "This business is not about what we like or don’t like. We like defense names and it has great long-term potential. But as a money manager I look at risk-adjusted returns."

On digital companies, like Paytm and Zomato, he remains skeptical. "We don’t like anything in the hype or most admired territory. Hardly any cash flows, and they have their own challenges. I’m still very cautious on these names. Anything in the admired territory in the last 2-3 years has the potential for significant underperformance."

On the broader market, Tandon refrains from giving numerical targets. "We are not very good in forecasting absolute numbers. What we are good at is identifying inflection points. Right now the market is neither at an extreme inflection point on the long or short side. So it’s somewhere in between."

That said, Quant remains constructive. "India is risk-on. Globally it is risk-off. Net-net, we are long-biased."

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