Forgotten bluechips will be the next big winners: Nippon India’s Sailesh Raj Bhan

Forgotten bluechips will be the next big winners: Nippon India’s Sailesh Raj Bhan

The top winners of the next three to five years will be different from those of the previous rally, said Sailesh Raj Bhan, CIO of Nippon India Mutual Fund. While the absolute top 10% will see fresh leaders, a strong 30-40% of winners could come from sectors like power, capital goods, and other order-driven industries—areas now sensibly valued and likely to deliver 15-20% earnings growth.

“Investors with a three-year horizon should see this as a market to accumulate,” Bhan said in an exclusive conversation with Moneycontrol.

Read full interview HERE

Momentum plays: stick to leaders, avoid the rest

Within momentum-driven sectors that corrected and rebounded, excess ownership has led to deep corrections. Bhan’s approach? Own the leaders, avoid second- and third-tier companies whose bull runs may be over. “High-quality businesses in industrials—companies that will generate ₹1,000 crore operating profit and have a ₹10,000 crore market cap—are classified as small caps today but are far from fragile,” he noted. Leaders in industrials and power utilities, particularly those with 25% earnings growth, still look attractive and could generate 15% annual returns.

Forgotten bluechips: contrarian bet

Beyond industrials, Bhan is betting on “forgotten blue chips” across sectors like insurance, cement, and consumer stocks—companies with strong fundamentals but depressed valuations. “Some of these have been in price stagnation for years. With low multiples, their downside is limited, and any earnings surprise could trigger a re-rating,” he said. Historically, multiple re-ratings follow sustained earnings expansion over three years.

Consumer stocks: from overpriced to overlooked

Bhan is particularly bullish on consumer names that were once market darlings. “Companies that traded at 60-70x earnings for five years are now available at 30x FY27 earnings, and no one wants them,” he observed. While they aren’t dirt-cheap, strong management and 15-20% earnings growth with good ROE make them compelling. “Valuations will stabilise, and returns will follow,” he added, noting that lower earnings expectations could set the stage for positive surprises and stock re-ratings.

Defence stocks: stick to leaders

Despite the positive sentiment surrounding defence stocks, Bhan remains cautious. “There’s too much noise,” he said, advising investors to avoid smaller players and focus on industry leaders. Smaller defence companies function as subcontractors with low margins, often facing cost and time overruns. “Considering current valuations, some stocks may see earnings-led returns, but smaller companies risk severe de-rating,” he warned. If earnings disappoint, these stocks could struggle for an extended period.

READ MORE: Mid and small caps still predominantly overvalued