Tandon said India’s relative attractiveness could improve further if global markets, particularly the US, South Korea and Taiwan, witness corrections. He also expects investors to shift towards under-owned, cash flow-generating businesses backed by capital expenditure rather than relying on the index for returns.
According to Tandon, foreign institutional investor (FII) selling has largely run its course, and overseas investors are gradually returning to India.
“The background is more constructive and very stock specific, rather than getting too much worried about what is happening in terms of index level,” he said.
Infra, power remain preferred sectors
Tandon said infrastructure continues to be Quant Mutual Fund’s preferred investment theme, driven by rising capital expenditure from both the public and private sectors.
He believes opportunities remain in ports, airports, roads, power, renewable energy, utilities, telecom and selected defence companies, where earnings are supported by cash flows and execution.
“We are very clearly looking at under-owned stocks,” he said, adding that the fund is focusing on companies that remain under-researched despite improving fundamentals.
Cautious on banks despite rebound
While acknowledging that private banks have corrected sharply and may continue to recover in the near term, Tandon said he is not convinced the rally will sustain.
He expects leadership to gradually shift away from some of the market’s largest companies towards businesses that have remained overlooked by investors.
Selective approach to IT and FMCG
After maintaining a cautious stance on information technology (IT) stocks, Tandon said valuations have become more attractive following their underperformance.
However, he ruled out taking aggressive positions.
“We have started nibbling into IT, but very selectively… this is not a time to go all in,” he said.
Tandon believes the FMCG sector is seeing improving conditions after several quarters of weak performance. However, he said valuations remain elevated, making selective investments more appropriate than broad exposure.
Small-cap opportunities remain
Tandon continues to prefer small-cap and micro-cap companies over mid-caps, arguing that the opportunity set remains deeper despite the need for greater scrutiny of management quality and cash-flow sustainability.
He said mid-cap stocks remain relatively expensive because of limited investible options attracting institutional money.
Positive on upcoming IPO pipeline
Tandon also welcomed the pipeline of large public offerings expected over the coming months, including those from SBI Funds, NSE and Jio.
He said India’s capital markets have gained sufficient depth to absorb new issuances, provided companies come to the market with reasonable valuations.
For the full interview, watch the accompanying video
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