Edited excerpts from a chat:
The 360 ONE Flexicap Fund has delivered 17.5% over three years against 11.5% for the BSE 500 TRI. Which portfolio decisions have contributed most significantly to returns since the fund’s launch in June 2023?
The fund is built on a bottom-up approach, without bias toward any market cap. The large-cap component has ranged from as low as 38% to as high as 62%, purely based on our risk-reward analysis. A flexicap fund is expected to operate in this manner. Our stance on India’s manufacturing growth story played out well through our picks in electronics manufacturing, power T&D, renewables manufacturing and defence, while avoiding some large benchmark weights where we were bearish from a growth perspective. Bottom-up stock selection remains the core driver of our investment framework, rather than calls on market cap or sector.
How has the allocation between large-, mid- and small-cap stocks changed in 2026?
We run a market-cap- and sector-agnostic, purely bottom-up approach, so allocation is an outcome of stock selection, not a top-down call. At the start of 2026, our flexicap fund held about 62% in large caps, 21% in mid-caps and 14% in small caps. As the market corrected through the year, we identified and added several bottom-up small-cap ideas where, in our view, valuations had become reasonable. By June, the mix had shifted to roughly 49% large, 22% mid, and 26% smallcaps.Where do you currently see the strongest risk-reward, and which market-cap segment appears most vulnerable to earnings disappointments?Smallcaps may offer a good risk-reward at this juncture; mid caps are somewhat expensive; and large caps offer value, though growth concerns persist in many names. Our portfolio construction is based on a bottom-up approach across our SCDV quadrants (Secular, Cyclical, Defensive and Value traps), and within that framework, we’re seeing reasonable opportunities in the small-cap segment, with healthy growth and decent valuations.
What is your core investment style, quality, growth, value or a blend, and how does that change across market cycles?
We follow a blended investment style that helps balance growth and value while maintaining some defensive positioning, all within a stable bottom-up approach. Our SCDV framework (Secular, Cyclical, Defensive and Value traps) guides portfolio construction. Secular growth forms the core, while value traps remain the least preferred. We dynamically adjust our allocation between cyclicals and defensives based on the economic outlook and valuations, ensuring diversification across all four quadrants.
What returns should flexi-cap investors realistically expect over the next 3-5 years?
We don’t try to time markets or predict returns. We use a simple valuation framework to gauge risk. Historically, Nifty’s price-to-book has mostly traded in a 2x-4x band. At around 3x P/B currently, Nifty is trading close to its 20-year median, which makes for a reasonable entry point.
The bigger story isn’t in the Nifty but in the broader market. The Nifty 500 has witnessed comparatively better earnings growth than that of the Nifty in FY26. The signals for a better earnings cycle are falling into place. Crude, credit, consumption and capex could together drive a meaningful rebound in Nifty 500 earnings as we move into the second half. The flexicap category has the potential to outperform the Nifty by a healthy margin, provided flexicap products are genuinely managed as flexicap funds.
Which sectors are your most bullish on from a long-term perspective, and why?
Manufacturing is how I’d characterize India’s next decade. Go back twenty years, and the answer would have been consumption instead. Renewables is a clear example: five years ago we imported most solar equipment, today modules are made domestically, and from June onwards solar cells must be made in India too, with wafers likely to follow. That pulls in transformers, battery storage and a whole adjacent ecosystem. Semiconductors are at an early stage, but one we’re tracking closely.
As far as AI is concerned, India’s real opportunity isn’t in direct AI plays. It’s in the second-order beneficiaries, particularly data centres. We’re looking at roughly 14 GW of capacity coming up over the next five to seven years, backed by upwards of ₹10 lakh crore of investment. That spills into T&D equipment, cables and wires, diesel gensets and renewable energy equipment, exactly where we’re finding opportunities today, alongside defence and electronics manufacturing, both of which have already proven what domestic capability can deliver. So, renewables, power T&D, semiconductors are other areas of the evolving manufacturing story.
After financials, industrials is your second-largest holding at 13.44%. Now that some of these stocks have had a good run-up, do you see near-term correction risk, or are valuations still reasonable?
We do have a large overweight in the industrial space, especially in power T&D and renewable equipment manufacturers, along with a few other niche segments. Some stocks have become expensive, and we’re cognizant of that; we’ll take profit-booking action wherever the risk-reward turns unattractive. That said, the growth outlook in segments like T&D, renewables and EMS remains robust, and we’ll keep looking for investment ideas at the right risk-reward.
