From specializing in the High quality of companies and administration to making sure the precise Timing for long-term compounding, Rajkumar explains how the framework helps navigate a market more and more pushed by fundamentals.
He highlights why understanding a enterprise, figuring out earnings inflection factors, and prioritizing superior risk-reward alternatives are key to producing sustainable returns, particularly in immediately’s inventory picker’s market. Edited Excerpts –
Q) Thanks for taking the day out. Nifty closed with marginal features in June, however for the primary six months of 2025 – it’s up over 7%. How do you see markets for the remainder of FY26? Any large occasions to be careful for?
A) Completely—whereas the headline numbers look steady, there’s so much brewing beneath the floor, each globally and domestically.
On the worldwide entrance, the most important overhang stays the U.S. tariff scenario. Though India has not been focused immediately, the absence of a proper commerce decision nonetheless leaves room for uncertainty.
The market is pricing in a possible constructive consequence, however latest steep tariffs introduced by President Trump on 14 nations—together with Japan and South Korea—may create ripple results throughout international provide chains. This provides to the broader geopolitical danger premium.
The U.S. Federal Reserve is one other key variable. It paused price cuts in December 2024 and is now ready to see how inflation behaves—particularly in response to tariffs—earlier than resuming any easing cycle. Any readability right here could possibly be a robust directional set off.
Domestically, we’re within the late phases of the financial coverage cycle. The RBI has already front-loaded a lot of its easing by way of price cuts and a CRR discount.
Whereas one or two price cuts would possibly nonetheless be on the desk, they’re more likely to be spaced out. Importantly, liquidity stays ample, which ought to proceed to assist credit score development and market sentiment.
Essentially the most important catalyst going ahead would be the earnings cycle. FY25 noticed lacklustre earnings development, which capped market momentum.
A significant rebound in Q1 and Q2 of FY26 can be key—robust earnings can justify present valuations and drive additional inflows from each home and international traders.
Additionally price watching are flows into Indian equities by way of SIPs and FPI exercise—each stay resilient up to now. If macro stability and earnings restoration come by way of, we imagine the Nifty breaching its all-time excessive earlier than the tip of 2025 is not only doable, however possible.
Q) How are you managing the volatility in your portfolio? Any key learnings which you wish to share from 1H2025?
A) We strategy portfolio administration with a structured and disciplined course of. Our evaluate framework consists of quarterly earnings, month-to-month enterprise updates, annual studies, trade developments, and broader macro alerts.
We additionally deal with market costs as a helpful suggestions mechanism—they assist us problem our assumptions, however they don’t drive our selections.
The primary half of 2025 was undoubtedly testing. Volatility picked up after a really robust second half of 2024, and naturally, we requested ourselves whether or not any structural adjustments had been warranted.
However after cautious evaluation, we concluded this was extra of a wholesome correction quite than a basic breakdown. So, we held our positions with conviction—and that self-discipline is paying off as markets retrace in the direction of their earlier highs.
The important thing studying has been to remain anchored in course of and keep away from reacting to noise. In hindsight, not over-engineering the portfolio throughout turbulent phases has added extra worth than chasing tactical strikes.
As we glance forward, we stay centered on long-term secular traits and deepening consumer engagement—these proceed to be our north stars.
Q) One of many studies instructed that India Inc.’s income have grown almost 3x sooner than GDP since FY20. What structural elements are driving this divergence?
A) Sure, that is broadly correct — company earnings have considerably outpaced GDP development since FY20, and there are a number of structural elements at play.
First, the restoration from the COVID-induced low base in FY20 gave a pure enhance to earnings. However extra importantly, FY22 and FY23 noticed robust topline development, aided by excessive commodity costs and strong demand throughout sectors. Even adjusting for the bottom impact, income momentum has remained wholesome.
Margins have additionally expanded meaningfully. Corporations centered closely on price optimization and provide chain efficiencies in the course of the pandemic, and people features have continued.
Formalisation of the financial system post-GST has improved compliance, decreasing leakage and boosting operational efficiencies — particularly for bigger, organized gamers.
Within the monetary sector, improved asset high quality and decrease provisioning necessities have pushed robust bottom-line development, together with some one-off write-backs.
Company India has additionally change into extra disciplined with capex, main to higher capital allocation, robust free money circulation technology, and widespread deleveraging.
In brief, a mix of working leverage (increased margins on steady revenues), monetary leverage (decrease curiosity and provisioning prices), and structural tailwinds like GST, digital adoption, and improved governance requirements have all performed a task on this divergence.
Going ahead, if this self-discipline continues and demand stays resilient, India Inc. may maintain the next earnings development trajectory than nominal GDP for a while.
Q) With the China+1 theme gaining traction, which Indian sectors are greatest positioned to draw international capital and scale?
A) The China+1 technique is not only a narrative — it’s translating into actual capital flows, and India is rising as a key beneficiary.
A number of structural benefits work in our favour: a big, low-cost labour pool, a robust STEM expertise base, and a proactive authorities that is aligned on bettering ease of doing enterprise and constructing important infrastructure.
Sectors well-positioned to learn embrace:
● Prescription drugs and Specialty Chemical compounds: India has lengthy been a trusted provider of generics and intermediates. What’s modified is the worldwide want to derisk China publicity. As an illustration, the U.S. and EU have been actively seeking to supply key APIs (Energetic Pharmaceutical Substances) from India. Equally, specialty chemical substances utilized in agrochemicals and electronics are seeing capex bulletins from international corporations, particularly in Gujarat and Maharashtra.
● Electronics Manufacturing: Pushed by the Manufacturing Linked Incentive (PLI) scheme, India has seen firms like Foxconn, Pegatron, and Tata Electronics commit billions to constructing cell phone and element amenities. A putting instance is how Apple now assembles iPhones in India, which a number of years in the past would have been unthinkable at scale.
● Semiconductors and ATMP (Meeting, Testing, Marking, Packaging): Whereas India remains to be early in chip fabrication, the backend ecosystem is gaining traction. Micron’s funding in Gujarat for an ATMP facility is a landmark growth. The truth that a U.S. semiconductor main selected India for its first such funding speaks volumes.
● Auto Parts: With EV adoption rising globally, India is turning into a hub for sure key elements, particularly for two-wheelers and small vehicles. A number of Japanese and German Tier-1 suppliers are increasing their Indian footprint to serve each native and international OEMs.
● Renewables and Inexperienced Manufacturing: India’s photo voltaic panel, battery, and inexperienced hydrogen sectors are receiving a robust coverage push. Corporations like Reliance and JSW have introduced huge investments right here, and international gamers are starting to collaborate as effectively.
What’s working is not only the fee benefit — it’s the credibility India has gained in key international provide chains. A superb anecdote: Apple’s India-made iPhones made up almost 7% of worldwide iPhone manufacturing in 2023, up from lower than 1% simply three years prior. That type of scale-up tells us the shift is actual, not simply aspirational.
Q) How is fastened earnings as an asset class in search of long run funding. How a lot cash one ought to allocate as an hedge to fight volatility?
A) Investing is extra about behaviour than anything. Mounted earnings performs an important function in any long-term portfolio—not essentially for maximizing returns, however for bringing in stability, stability, and predictability.
Whereas equities are inclined to outperform different asset lessons over lengthy intervals, they arrive with cycles of volatility that may take a look at investor behaviour.
There’s a large spectrum inside fastened earnings as effectively—starting from ultra-safe devices like short-duration authorities bonds to higher-yielding, credit-risk-bearing belongings like company bonds and even distressed debt. Traders ought to allocate primarily based on their time horizon, liquidity wants, and danger urge for food.
As a thumb rule, any cash you anticipate to wish within the subsequent 2–3 years ought to ideally be parked in lower-risk fastened earnings devices. For longer-term allocations, a mixture of period and credit score methods can improve general portfolio resilience and scale back drawdowns throughout fairness corrections.
Additionally, in a structurally declining rate of interest atmosphere or during times of excessive coverage uncertainty, fastened earnings can ship respectable risk-adjusted returns.
Finally, asset allocation is much less about chasing returns and extra about managing feelings. And glued earnings is a robust enabler of that self-discipline.
Q) Which sectors are more likely to stay in highlight in 2H2025?
A) From our perspective, a number of structural themes proceed to play out, and our portfolio positioning displays that.
We stay obese on client discretionary, healthcare, NBFCs and HFCs, in addition to the broader journey and tourism area—every benefiting from cyclical tailwinds and regular home demand.
A key focus space for us is capex-linked performs, particularly in energy and industrials. What’s notably noteworthy is that personal capex is now starting to outpace public spending for the primary time in over a decade.
This shift has significant implications for capital items, development, and sure segments of producing.
We’re additionally selectively positioned in IT. Whereas the sector as a complete stays beneath strain, we’re avoiding broad publicity and as a substitute specializing in firms with resilient margins, strong order books, and robust digital transformation pipelines.
Total, we proceed to again companies aligned with home development engines and people demonstrating pricing energy, stability sheet energy, and earnings visibility.
Q) Can we are saying that we’re in a “inventory picker’s market” forward. If sure, what are the important thing traits traders ought to search for in FY26 picks?
A) Completely—we imagine the broad-based rally is behind us, and we’re firmly in a inventory picker’s market now. The straightforward features from driving sectoral or index-wide strikes are giving strategy to a extra nuanced section the place particular person firm fundamentals will drive returns.
At Quest, inventory choice has all the time been core to our philosophy. We comply with what we name the QUEST Means—a disciplined framework that guides our decision-making:
● Q stands for High quality of enterprise and administration. We search firms with robust governance and sturdy aggressive benefits.
● U is for Understanding—if you happen to can’t perceive a enterprise, you shouldn’t personal it. Simplicity usually outperforms complexity.
● E is about Earnings potential—particularly the flexibility to determine inflection factors the place earnings development could speed up.
● S represents Superior risk-reward—we search for asymmetry, the place draw back is restricted however upside is significant.
● T reminds us of Timing—not within the sense of market timing, however the self-discipline of spending sufficient time available in the market to permit compounding to work.
Whereas these traits are timeless, sector context issues too. Given that almost all companies are cyclical, we regularly apply a sectoral filter primarily based on our macro and trade views. As soon as a sector is recognized as engaging, the main focus shifts to bottom-up inventory choosing utilizing the QUEST framework.
In FY26, success will hinge much less on driving market beta and extra on precision—figuring out the precise companies on the proper stage of their journey.
Q) Gold has additionally seen an incredible run in 2025 – how do you see the yellow metallic shining in 2H2025? Time to ebook income or add on dips?
A) Gold has been in a robust uptrend over the previous few years, and 2025 has been no exception—with year-to-date returns of round 38%. This rally has been underpinned by a confluence of structural drivers: persistent geopolitical tensions, gold’s function as an inflation hedge, rising issues round U.S. fiscal self-discipline, and a world shift in the direction of de-dollarization.
A notable pattern has been the surge in central financial institution demand—whereas common annual purchases a decade in the past hovered round 400–500 tonnes, they’ve persistently crossed 1,000 tonnes in every of the previous three years.
Given this backdrop, some tactical revenue reserving could also be justified after the sharp run-up. Nevertheless, from a strategic allocation standpoint, gold stays a helpful diversifier in portfolios.
The long-term case stays intact, particularly as international macro uncertainties proceed to linger. Including on dips could possibly be a prudent strategy quite than exiting altogether.
Q) How ought to one play the small & midcap theme? Has the profitability improved in comparison with massive caps – what does the info counsel?
A) In FY25, midcaps delivered strong earnings development of round 15%, clearly outpacing massive caps, which noticed extra muted development of 5–6%. Alternatively, small caps underperformed meaningfully, with earnings declining by over 15%, reflecting the inherent volatility in that phase.
Looking forward to FY26, massive cap earnings are anticipated to enhance regularly, aided by base results and cyclical restoration in a number of key sectors.
Midcaps, whereas nonetheless having fun with stronger earnings momentum, at the moment are buying and selling at a valuation premium to each massive and small caps — suggesting that returns could also be extra according to earnings development quite than pushed by additional re-rating.
Small caps, regardless of their latest earnings dip, are projected to develop earnings by 15%+ in FY26, however the dispersion goes to be excessive. That requires a extra selective, bottom-up strategy, specializing in stability sheet energy, administration high quality, and scalability.
The midcap rally has been largely earnings-led, not simply liquidity-driven — and that’s signal. However with valuations elevated, traders have to be disciplined.
In small caps, it’s much less in regards to the index and extra about figuring out the subsequent multibaggers over the mid-term horizon — which requires persistence, analysis depth, and place sizing.
Q) Any sector which is operating out of steam and traders ought to fastidiously pare their positions?
A) That is a tricky one to answer. Somewhat than taking a purely sector-specific view, we desire to have a look at particular person shares inside every sector. In our view, the extra related query for traders is: Has an excessive amount of of the long run earnings potential already been priced in?
If valuations have run considerably forward of fundamentals it might be prudent to pare positions. That is very true when the present inventory value implies a stage of development and profitability which may be onerous to maintain given macro or aggressive realities.
Finally, we imagine inventory choice must be pushed by bottom-up conviction. Even in sectors dealing with near-term headwinds, there may be standout companies with sturdy moats and pricing energy. However the place expectations have outrun earnings visibility, it is smart to be cautious.
(Disclaimer: Suggestions, ideas, views, and opinions given by consultants are their very own. These don’t signify the views of the Financial Occasions)
