
Is bottom-up investment strategy key to unlocking growth in today's market? Krishnan VR explains
Krishnan VR
of
Marcellus Investment Managers
says given the current
market uncertainty
, investors are advised to concentrate on bottoms-up
stock analysis
, particularly within the
mid and small-cap segments
. Emphasis should be placed on identifying companies with strong growth potential, as growth is becoming increasingly scarce. Companies demonstrating consistent
earnings growth
over the medium term present lower
valuation risks
.
Firstly, help us with your outlook on the markets because it seems like that the markets have seemed to be climbing the wall of worry, especially with respect to the tariff tantrum and the slower growth that was anticipated earlier. But from here on, how do you see the Indian markets performing and where is the tilt? Is it still with the largecaps or do you believe that now SMIDs are also offering some opportunity?
Krishnan VR:
In terms of the Q4 earnings season, we looked at the earnings performance of companies and roughly when you look at the earnings growth of Nifty 50 companies, it has been in mid-single digits. Bulk of the earnings outperformance seems to have come from banks and downstream oil marketing companies. And if you remove these two sectors, broadly earnings growth has kind of just met expectations. I would not go to sector specific commentary, we can discuss it in detail, but coming to valuations, again what I would say is when you look at aggregate indices whether it is mid and smallcap indices, when you look at the aggregate valuation, again Indian small and midcap indices are trading above long-term averages.
You might argue that the valuations are high not only with respect to their own history, but also compared to largecaps or with mid and smallcap indices in other emerging markets which have similar growth outlook.
Even if you look at things like the one-year forward price to earnings or a valuation ratio for an average stock, within BSE 500, at least per our calculation, today this number is somewhere around 33 times which is higher than historical standards and which gives an idea about the breadth of the extended valuation across stocks. So, when the recent rally in the last one or two months within mid and smallcap indices is put in the backdrop of these extended valuation, the one comment you could make is maybe the market is expecting some improvement in earnings growth for FY26, FY27, backed by an improving macro.
But when I look at these valuations, it suggests that the wall of worry or some of the uncertainties around the ongoing tariff negotiations with the US, has not completely been priced in and there are also other structural issues. For example, the low wage growth in India which is impacting urban consumption as we know it. When I look at the growth outlook and some of these uncertainties and put this together against a backdrop of extended valuation, it is a worry.
Live Events
You Might Also Like:
Investing strategy: Can quality help you minimize risk and maximize returns?
Given the current volatility that we have been seeing on the back of global trends, help us with some factors that we should be steering clear of and how to navigate this market?
Krishnan VR:
Obviously, every market is different and one can look at some points in history, but history seldom repeats but it often rhymes. So, given the uncertainty, I would strongly suggest that investors again focus on bottoms-up stories. Even when I talked about the mid and smallcap valuations, remember that mid and smallcap stocks or the mid and smallcap space in India is a very wide space. So, all the stocks excluding the top 100 stocks. In some cases, there are very long growth runways and obviously valuation should be seen in context of both profitability and valuation.
So, look at bottoms-up stories, be stock specific as much as possible and at the same time focus on growth because we are at this point in the cycle where growth is going to become more and more scarce. And when growth becomes scarce, the companies which can deliver growth in whatever ways – it could be certainties of growth, it could be the longevity of the growth – become that much more valuable.
So, even when you look at a valuation, there is a lesser valuation risk for a company which can deliver earnings growth over the next two-three years or even in the medium term. So, one strategy could be to focus on companies in a very bottoms-up way and on those which can deliver outstanding earnings growth.
In your quant research you wish to highlight some sectors which tick many of those check boxes. Since people are finding it a little hard to find new ideas in this market construct, given the market correction and the tepidness, can you help us highlight some of the sectors that are looking good or rather building on some bit of momentum? Sectorally, where are you finding some tilt?
Krishnan VR
: We like financial services as such and because financial services is not just lending, not just banks and NBFCs, there is also wealth management, RTAs, and insurance. When you look at the wider financial services in India, whether it is insurance, life insurance, RTAs, wealth management, etc, they have very long growth runways. Stocks within these sectors have secular growth stories and even when you look at things like momentum, the earnings growth momentum has been pretty good.
You Might Also Like:
Nifty up 13% from April's low. How should mutual fund investors alter their investment strategy?
Estimates, etc, have been revised upwards over the last two-three years. So, when you look at it both from top-down perspective and even from a bottoms-up perspective, the broader financial services is definitely attractive, but our investing style is sector agnostic. We are looking at clean, well run, well governed companies with low debt, with the return on capital above cost of capital. That tends to be our criteria and you can find such companies in many sectors. We do not tend to be very top-down or take sector specific calls, but the broader financial services definitely look attractive.
I also want your view on the earnings season. Q4 is almost over. Most of the Q4 earnings are out and FY26 and FY27 is when we can start seeing improvement. But when exactly in FY26 do you see improvement coming in? Could it be the next quarter like the Q2 or in the second half of the year? Also, do you think conditions like the early onset of monsoon could impact earnings in FY26?
Krishnan VR:
In terms of the earnings growth, the consensus is for baking in close to high teen earning growth for Nifty and this is over FY26 and FY27.
Coming to your question on how this might pan out, at least for us, we see there could be two likely triggers for upgrades if at all. One could be, for example, the lower crude oil prices. India is a net importer of crude. For a lot of companies, their cost of goods or the cost of raw materials is linked to crude oil prices one way or the other. So, there would be some benefit on the margin if the crude oil prices stay where they are or even go lower.
The other trigger for upgrading would be if we see some green shoots in urban demand and in my view that could be in the second half of the year if at all because we have just seen inflation that has come down. If you exclude commodities, gold, etc, the core CPI is down even below 4% now. With inflation easing and the lower personal tax outgo under the new tax regime, that would also be something that could give a fillip to urban demand and, of course, we already know that rural demand has fared much better in the last earning season in 4Q versus urban and if there is an early onset of monsoon, then it helps rural demand also to that extent.
You Might Also Like:
Don't Chase Hype: Anshul Saigal sticks to value over virality in stock selection
So, yes, I mean, we might see a bigger impact on the company's earnings if all these factors play out in the second half rather than the first half.

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


Time of India
35 minutes ago
- Time of India
Indian expats strike luck in UAE big ticket raffle, wins Dh150,000 each
After years of trying, Indian expats in the UAE win Dh150,000 each in the latest Big Ticket draw, with some sharing their winnings among friends/ Live Screen Grab As anticipation builds for the Dh25 million Big Ticket grand prize draw on July 3, five lucky individuals have already secured a windfall of Dh150,000 each in the latest round of winnings, among them, several Indian expatriates who have spent years in the UAE building lives, working hard, and hoping for a breakthrough. This month's Big Ticket Abu Dhabi draw turned dreams into reality for a delivery rider, a businessman, a former UAE shop owner, and other long-time residents who placed their bets with persistence, patience, and a dash of hope. Kerala Delivery Rider Strikes Gold After Six Tries Abdulla Pulikkoor Mohammed, a 34-year-old delivery rider from Kerala, has been living in Abu Dhabi for the past nine years, supporting his family back in India. Despite having purchased only six Big Ticket entries, he hit the jackpot this time, sharing the winning ticket with a group of 12 friends. 'Receiving the winning call made me feel happy. I plan to split the prize money with my friends and use my share to clear some loans,' he told Khaleej Times . 'Big Ticket is truly doing wonders, and I believe everyone should take part.' His win is a reflection of how even modest participation, when shared and consistent, can lead to big rewards. Businessman From Kerala Wins in Just Seven Months Another Indian expat, Salihrahman Pallipadath, a 37-year-old businessman, has been living in Ajman for 15 years with his family. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Good News: You May Be Richer Than You Think Undo Though he first learned about Big Ticket two years ago, he only started buying tickets seven months ago, also as part of a group of 11 friends. 'Receiving the winning call was a great experience – I'm truly happy,' Pallipadath said. 'I plan to use the prize money to renew my company visa. I'll continue purchasing from Big Ticket, and I encourage others to do the same. It's a luck-based raffle, and everyone should keep trying.' His story is one of perseverance and optimism, especially significant in the face of everyday business pressures and long-term responsibilities as a UAE-based entrepreneur. Former Sharjah Shop Owner Wins After a Decade of Tries Babulal Gautam, a 68-year-old from Mumbai, India, is another Big Ticket success story. He lived in Sharjah in 2014, where he ran a shop before returning to Mumbai. He's been buying Big Ticket entries for ten years, a full decade of trying that finally paid off. 'I actually missed the winning call, but I saw the email and was overjoyed. I kept checking and rechecking to make sure it was real. After a whole decade of trying, it finally happened,' he said. Known for his practical outlook, Gautam shared a piece of advice for hopefuls: 'I'm more of a scientific person and don't believe in luck much, so I believe the first step to winning is to simply buy a ticket.' His long journey with the raffle is a reminder of the patience and persistence that many expats maintain in the face of uncertain rewards. Also among the Dh150,000 prize winners is Shaji Memana, another Indian expat originally from Kerala. Memana bought his winning ticket online, and the news of his win came as an unexpected joy. Countdown to the Dh25 Million Grand Prize The next major Big Ticket event is the live grand prize draw on July 3, where the staggering Dh25 million jackpot will be awarded. In addition to the main prize, three winners will take home Dh75,000 each. Leading up to the grand event, Big Ticket will also hold weekly E-draws, with upcoming dates as follows: Week 1: June 10 Week 2: June 17 Week 3: June 24 Week 4: July 1 With decades-long participation from the Indian community, especially among expats, Big Ticket continues to hold deep emotional and financial appeal. It offers not just a shot at fortune, but a moment of recognition and relief for thousands working hard across the UAE.


India Gazette
an hour ago
- India Gazette
Swiss cosmetics brand Cellcosmet says it's time to enter India market
Bern [Switzerland], June 9 (ANI): Tancrede Amacker, CEO of Swiss cosmetics firm Cellcosmet, on Monday showed clear intent that he wishes to enter India market. The Swiss CEO met Commerce Minister Piyush Goyal, who is on a two-day Switzerland visit. 'It was a wonderful do high-end cosmetics, we sell high-end skincare made in Switzerland, and the idea is how could we enter India,' he told ANI. 'It's a wonderful country in terms of size and the population is have the pleasure to serve the Indian customers in Singapore, in London or in Switzerland, but not yet in India, and it's time for us to enter,' he added. 'So we were discussing about the possibilities when it comes to distribution,' he further said. During the meeting, they talked of possibility of collaborating with Nykaa. 'That's a wonderful platform that (and) we are very interested in,' the CEO, said, referring to Nykaa. He said minister Piyush Goyal suggested the Swiss company to think about co-packing initially, and produce in India at a later stage. 'The first step would be to enter India through a partner, so Nykaa could be one, that's kind of distribution partnership where we are help take I would say the understanding and the knowledge of the market and trying to adapt a business proposition to the Indian market,' he explained. And then in the second stage, we will find the right places to do this copacking and maybe manufacturing. An India trip is being organised for Swiss companies in September, the CEO said. 'A lot of Swiss colleagues will come along the way and we'll find out what are the best locations for us to implement,' he said. 'It's a wonderful investment destination. I mean that's the size of the market, but also the appetite for luxury goods as well is extremely strong. It's a very young and dynamic population, very educated as well, so it clicks, all I would say the right boxes for manufacturing and selling high-end cosmetics,' he concluded. Union Minister of Commerce and Industry Piyush Goyal, commenced his official visit to Switzerland on Monday, as part of his ongoing visit to Switzerland and Sweden from 9-13 June 2025. 'This visit underscores India's steadfast commitment to deepening strategic and economic partnerships with key European nations, advancing robust trade and investment ties, and supporting a shared vision for resilient global growth,' his ministry said in a statement. The visit commenced in Switzerland today, where the Minister engaged with global CEOs and prominent industry leaders to explore opportunities for strengthening bilateral trade and investment. The itinerary includes focused sectoral meetings with prominent Swiss industry leaders in areas such as Pharma and Life Sciences, and Precision Engineering/Machine Tools/High-tech Manufacturing. The Minister will also connect with the ICAI Zurich Chapter and interact with Indian media. A significant highlight will be meeting with Federal Councillor Guy Parmelin fostering strong trade and diplomatic ties. 'A significant component of the high-level visit to Switzerland will include a series of one-on-one meetings with leading Swiss companies. Indian industry representatives will also participate in these crucial engagements, fostering direct dialogue and exploring specific collaboration opportunities. The day will also feature participation in the Swissmem Industry Day and a Business Round Table with the Swiss Mechanical and Electrical (MEM) Industry, where deliberations will focus on the potential and opportunities arising from the India-EFTA Trade and Economic Partnership Agreement (TEPA),' the commerce ministry statement said. (ANI)


India Gazette
an hour ago
- India Gazette
Indian Army to get Rs 30,000 crore QRSAM air defence missile system boost
ANI 09 Jun 2025, 20:47 GMT+10 By Ajit Dubey New Delhi [India], June 9 (ANI): At a time when Indian air defence systems successfully thwarted the Pakistani aircraft, missile and drones attacks under Operation Sindoor, the Indian Army is all set to get Rs 30,000 crore boost with a new surface-to-air missile system expected to be cleared for acquisition by the Defence Ministry soon. The Defence Ministry is scheduled to take up the proposal for buying three regiments of the indigenous Quick Reaction Surface to Air Missile system (WRSAM) for the Army Air Defence for deployment along both western and northern borders, defence officials told ANI here The missile systems, developed by the Defence Research and Development Organisation, are highly mobile as they have the capability to search and track targets on the move and fire at short halts, they said. With a range of around 30 km, the system would be complementing the existing systems in the forces like the MRSAM and Akash in short to medium ranges. The missile system performance has been extensively evaluated under both day and night operational scenarios during the trials. The meeting of Defence Acquisition Council is planned to be held around the fourth week of June. During the four-day conflict with Pakistan, which used Chinese weaponry, the Indian Army's Air Defence units destroyed majority of the drones using L-70 and Zu-23 air defence guns while the Akash and MRSAM played a crucial role along with the Indian Air Force's Spydwr and Sudarshan S-400 air defence systems. The Army Air Defence is also getting a number of new radars, very short range air defence systems along with jammers and laser-based systems to deal with drones of Turkish and Chinese origin. (ANI)