'Large caps offer a better margin of safety today'

Summary: With market highs testing patience, SVP & Portfolio Manager – India Equities at Templeton Global Investments explains why large caps now offer a better margin of safety, how disciplined stock filters shape focused portfolios, and what triggers sector shifts. A conversation on valuation, risk–reward and selective contrarian bets. Even as equity indices hit fresh highs, Venkatesh Sanjeevi is turning more attentive to where the real margin of safety lies. The SVP & Portfolio Manager – India Equities at Templeton Global Investments, who oversees eight schemes managing over Rs 31,273 crore, believes large caps now offer a more reasonable risk–reward than the mid- and small-cap universe, where earnings expectations look far less forgiving. Yet he sees selective bottom-up opportunities emerging in small caps, provided quality and valuations align. A focused stock-picker who works with a tightly filtered universe and high active share, Sanjeevi explains how disciplined frameworks, intrinsic value and sector triggers shape his large-cap and large & mid-cap portfolios—and why performance has sharply turned around. Equity markets are at record highs. How are you reading the valuation gap between large caps and the mid–small-cap space today? Are large caps starting to look more attractive on a relative basis? We shouldn’t look at valuations in isolation. That said, if you compare large caps with, let’s say, the mid-cap category, the headline multiples of large caps are definitely lower than those of the mid-cap segment. But it’s also true that the growth rate in large caps is probably lower than the typical growth rate of a mid-cap company. The point I want to highlight right now is more around the margin of safety. Today, the earnings growth expectations for large caps seem more reasonable than those for mid caps. So, if things don’t really work out in terms of growth, there is probably more risk to earnings and multiples on the mid-cap side compared to the large-cap side. So, while valuations are more attractive, I think the more important factor is that the margin of safety looks better on the large-cap side, especially given today’s macro volatility. And so, I think it’s looking more reasonable. Small caps, on the other hand, are a bit of a different ballgame because it’s a very large universe. The headline multiples may or may not reflect the true picture. What I’m seeing now is that within small caps, given the huge list of companies that are listed and available, there are perhaps more ideas that are more reasonable or more fairly valued, although the headline level could look a bit tricky. But yes, some bottom-up ideas are more visible in the small-cap space. Can you elaborate on your investment style and stock-picking framework—from the initial screen to the final portfolio allocation? What are your non-negotiables at each stage? To start with, the investable universe is primarily the top 100 st