Pawan Bharaddia of Equitree Capital sees catch-up potential in sectors like agriculture, railways, infrastructure ancillaries, and textile exporters—many of which have lagged despite strong structural tailwinds.
He is also watching for a pickup in consumption, which could emerge as a key driver.
According to him, Q1FY26 will effectively set the tone for the full year, both in terms of earnings trajectory and market expectations. "Managements commentary and guidance will offer valuable insight into demand trends, margin outlook, and how companies are navigating macro challenges," the Co-founder and CIO of Equitree Capital said.
Do you currently see significant value in small and microcap stocks—potentially even more than in large-cap names? If so, which sectors within the small and microcap space do you find particularly attractive at this stage of the market cycle?
It’s a bottom-up market right now, and broad generalisations don’t hold. While there are certainly pockets of froth, it’s equally true that a significant number of companies—over 400 (~30%) out of 1,350 companies in the market cap range of Rs 200 to Rs 5,000 crore—are still trading below 20 times trailing earnings. That indicates there are enough opportunities for investors who are selective and research-driven.
We remain particularly constructive on old economy sectors like engineering, capital goods, infrastructure and manufacturing in general. Consumption is another promising theme, especially in light of recent tax rate changes and interest rate cuts.
In your view, are the key drivers for FY26 earnings growth still unclear or yet to fully emerge? What could potentially serve as the catalysts for improved visibility in the months ahead?
While some sectors like IT, chemicals, and building materials are still sluggish, the broader earnings drivers are becoming more visible. Export opportunities are rising, supported by tariff shifts, and structural trends like China+1 and Europe+1. Tariffs are now an incremental factor—how managements adapt to them will be key. For some companies, this could turn into a competitive advantage, improving earnings visibility in the coming quarters.
How crucial do you believe management commentary and forward guidance during the Q1FY26 earnings season will be in shaping market sentiment and forming a concrete view on FY26 earnings projections?
Q1FY26 will effectively set the tone for the full year, both in terms of earnings trajectory and market expectations. Managements are closely aligned with on-ground realities, so their commentary and guidance will offer valuable insight into demand trends, margin outlook, and how companies are navigating macro challenges. This will play a key role in shaping investor sentiment and refining FY26 earnings projections.
Are you inclined to wait for the full picture from the June quarter earnings season before making any significant investment decisions or portfolio shifts?
As long-term investors, our focus remains on structural stories rather than short-term numbers. While we do track quarterly results closely, they’re not the primary driver of our investment decisions—unless they indicate a material shift in the long-term outlook. That said, we use the quarterly earnings to assess how various sectors are performing to identify areas showing early signs of revival or emerging strength.
Are you currently bullish on the private healthcare sector, particularly private hospital chains?
We generally avoid asset-heavy businesses, and private hospital chains tend to fall in that category. The capital-intensive nature of the business and elongated return cycles make it less aligned with our investment approach.
Which sectors, in your opinion, have underperformed so far in FY26 but hold strong potential to catch up or outperform in the remaining part of the fiscal year?
The market has largely been in a consolidation phase over the past 9 months with Nifty 50 and Nifty Small cap 100 delivering -3.3% and -1.6% returns respectively. That said, we see catch-up potential in sectors like agriculture, railways, infrastructure ancillaries, and textile exporters—many of which have lagged despite strong structural tailwinds. We’re also watching for a pickup in consumption, which could emerge as a key driver.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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