I usually have these conversations with myself before I plan allocation and positioning for clients. But this time, let’s go through it directly with you on how things are looking today as we stand.

Let’s get the numbers out before we get into narratives.

Valuation: Nifty PE stands at ~22x - a tad bit on the expensive side given how results have panned out this quarter.

Results: Around 1000 meaningful companies have announced their earnings. Average revenue growth has been ~7%, and profit growth around ~6%. Large caps have contributed meaningfully, while small caps have seen net profit degrowth of ~17%.

We’ve often looked at the Nifty 500 as a better benchmark than the Nifty 50, which is heavily tilted toward Financials, IT, and Oil, together making up more than half the index. Nifty 500 gives a more balanced spread. So while the Nifty itself may not do much in the near term (given IT is going through a paradigm shift and Oil is dealing with geopolitical stress), the broader markets could throw up interesting opportunities.

On the macro front, the biggest post-election stimulus has been the reversal in RBI’s policy stance. We had a real inflation problem - food prices spiked, and the RBI had to keep things tight longer than expected. These rate actions usually take two quarters or more to be felt on the ground, and they have slowed down growth. Our nominal GDP dropped to around 9% (usually closer to 11–12%), and that naturally affects topline and bottom-line growth for the average company.

In spite of all this, the markets have held up, thanks to domestic flows. We haven’t had much support from foreign capital, yet we’ve been resilient.

What’s changed now? Rate cuts, liquidity has been infused into the banking system, bad loan numbers are bottoming out, and there are early signs of credit growth. These things first show up in financials - in the tone and language of lenders - and then flow to corporates, manufacturers, etc.

When things aren't rosy, most corporates push optimism to H2 - you’ll hear “H2 will be better” a lot. That’s just how entrepreneurs keep morale up, both internally and with analysts, so stocks don’t drift. We don’t focus on these narratives.

What are we doing?

Our mutual fund strategy remains to deploy in core schemes tilted toward large caps and value style. We’ve also taken satellite bets in financials, and have a 25–30% allocation to small caps.

We spend time studying the fund managers behind our whitelisted schemes. Listening to their views - yes, they can’t be overtly bearish - but you get a perspective by just seeing how portfolios are being built. It’s like watching chess - you can tell if they’re playing defensive or offensive. We’ve been fairly successful in our picks. Can’t say the timing has always been perfect; we’ve often been early, but I don’t think we’ve ever been off on the direction or the narrative. I hope that continues.

And that too is a style - going early, even when we know the worst isn’t over yet. But seeking uncertainty is where we thrive - be it management changes, regulatory shifts, product mix evolution, capex going live, demergers - that’s what catches our eye more than the steady compounders. We can afford to take these calls because our clientele isn’t investing for savings - they’re investing for alpha. They have the time horizon and patience to ride through short-term pain because we know we’re aligned to win big eventually.

The next half of this FY is going to be volatile. Markets aren’t in a hurry, and quick gains will be rare. But this is when we enter unit collection mode and make the most of the discounts that will come multiple times.

I’m not sharing this as a cautionary note or a market update. I truly believe that the most important driver of outperformance is the sync, Advisor <> Investor sync. It all comes down to behaviour. If I can communicate and keep you steady and on course, that will be the real differentiator.