Performance, Positioning, and What the Quarter Reinforced

The Q4 FY26 investor update was anchored around a simple but important point: in a sharply correcting market, relative performance is the true signal.

Despite one of the steepest quarterly declines in recent years, the portfolio delivered meaningful outperformance, reinforcing the strength of positioning, stock selection, and risk management.

Performance: Outperformance in a Falling Market

The fund declined 10.36 percent versus 14.44 percent for the benchmark, delivering 408 basis points of outperformance for the quarter.

More importantly, this is not an isolated outcome:

• 1-year return: 2.58 percent versus minus 3.99 percent benchmark
• Since inception: 16.21 percent CAGR versus 12.81 percent
• Wealth creation: 1 crore invested has grown to 4.01 crore versus 3.05 crore for the benchmark

The takeaway is clear. Alpha has been generated consistently across time horizons, not just in favourable markets but also during periods of stress.

What the Quarter Revealed: Stress-Testing the Process

The market correction was triggered by a geopolitical shock, with escalation in West Asia pushing crude prices higher and leading to a sharp, broad-based decline.

What stood out, however, was the resilience of the system:

• Domestic institutions absorbed record foreign selling
• No signs of liquidity stress or forced unwinding
• Market structure remained stable despite volatility

This reinforces a key distinction. The environment was volatile, but not fragile.

Performance Drivers: Positioning Created the Edge

Outperformance during the quarter was driven by deliberate positioning.

The benchmark decline was led by Banks and Information Technology, both of which saw sharp corrections.

The portfolio was positioned with:

• Underweight exposure to Banks and IT
• Overweight exposure to Healthcare and Mining and Minerals, which held up relatively better

Healthcare, in particular, acted as a stabiliser with significantly lower drawdowns compared to the broader market.

The broader insight is simple. In high-dispersion markets, avoiding large losers is as important as identifying winners.

Portfolio Positioning: Earnings Strength Remains the Anchor

Portfolio construction continues to be driven by earnings visibility, margin resilience, and structural tailwinds.

Relative to the benchmark, the portfolio demonstrates:

• Higher revenue growth
• Significantly stronger profit growth
• Superior gross margin profile

Positioning remains aligned to core themes:

Overweight sectors include Mining and Minerals, Healthcare, Chemicals, Consumer Discretionary, Capital Goods, and Insurance.

Underweight sectors include Banks and Information Technology.

The portfolio continues to favour businesses with pricing power, balance sheet strength, and earnings durability.

Market Context: Reset Valuations, Unchanged Trajectory

The recent correction has brought valuations to more reasonable levels.

The Nifty is now trading below its recent historical averages, with earnings yield spreads indicating a supportive forward return environment.

At the same time, domestic fundamentals remain strong:

• GDP growth remains robust
• Credit growth continues at healthy levels
• The capex cycle is strengthening
• Domestic flows remain supportive

The setup today is clear. Valuations have corrected, but the underlying growth engine remains intact.

How to Think About This Phase

This quarter reinforces a few enduring principles:

• Relative performance matters more than absolute movement during volatile phases
• Positioning and risk management drive outcomes in corrections
• Periods of discomfort often create the foundation for future returns

Key Takeaways

• Strong outperformance of 408 basis points validates portfolio positioning
• Alpha generation remains consistent across time horizons
• The correction served as a stress test that the process passed
• Portfolio remains earnings-led and selectively positioned
• Valuation reset alongside stable macro creates a constructive forward setup