'This decade may belong to mid-tier private banks'

Summary: Cheenu Gupta divides every portfolio into three buckets: stability, growth and turnaround. The allocation to each shifts with the environment, not with conviction about where markets are headed. That distinction is harder to maintain than it sounds.

Summary: Cheenu Gupta divides every portfolio into three buckets: stability, growth and turnaround. The allocation to each shifts with the environment, not with conviction about where markets are headed. That distinction is harder to maintain than it sounds. For Cheenu Gupta, a good portfolio is one that reflects the environment it operates in, not the one a fund manager wishes it were. As Fund Manager – Equities at HSBC Mutual Fund, Gupta brings nearly two decades of experience across some of India’s most respected asset managers, including Canara Robeco, Tata AIA Life Insurance and ING Investment Management. A CFA charterholder, she has built her investment philosophy around three clear portfolio buckets—stability, growth and turnaround—and is not afraid to act when conditions shift.  In this conversation, she shares her views on small-cap opportunities, mid-tier private banks, the case for commodities and where fresh money should go today. Markets have corrected from recent highs. Concerns around stretched valuations were widespread in 2024, though the correction has been more gradual than sharp. Where do valuations stand today? Have they normalised, and is that normalisation uniform, or are there pockets that still look expensive or attractive? It’s important to understand the context of where we are coming from. Even prior to the war, we had already seen around 18 to 20 months of a very sharp correction. That itself had brought the markets to a point where we sensed a bottoming out. And obviously, this was on the back of some earnings consolidation and market corrections we had seen. Before we could really enter a phase of earnings recovery, the war came in, and that is when the markets hit an absolute low last month. The war is still going on, but when it first started, I think markets corrected by almost 14-15 per cent year-to-date, which was a very sharp correction. Part of it is justified by the high crude levels that we have seen. But I think the broader theme is that, from a medium- to longer-term perspective, valuations have started looking a bit more attractive than what we have seen in Indian markets in recent years. Hence, we believe that if retail investors are entering with a medium- to long-term perspective, it is a good thing. Only in the near term, if you are expecting a sharp recovery, it could be delayed depending on how the war progresses and where crude prices stabilise. So, the near term is still a little uncertain and volatile, but from a medium- to longer-term perspective, markets are well positioned. Your Large & Mid Cap fund has about 14 per cent in small caps, roughly 5.5 to 6 per cent above the category average, while large-cap allocation appears underweight. Does this reflect stronger conviction in small caps, and is the positioning too aggressive for the category? I think the way to look at it is through the allocation to small caps in the Large & Mid Cap fund. We know how the category is defined, and there is a minimum 35 per cent allocation to large caps and a minimum 35 per cent alloca