He added that valuations across mid-cap and small-cap stocks have broadly normalised, creating opportunities after a period of investor fatigue and sustained selling pressure.
Improving earnings trends, supportive policy measures and reopening global markets for Indian exporters are also helping the outlook for smaller companies.
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According to Sachdev, investors with available cash can begin deploying funds selectively rather than waiting for perfect market conditions.
“One can fully deploy selective ideas without compromising on the quality of business,” he said, stressing that earnings growth remains the key driver for stock performance.
He believes markets are increasingly focused on companies that can sustain earnings expansion over time, making stock selection critical within the large small-cap universe.Sachdev highlighted several areas where opportunities are emerging:
- Banking and financial services: Improving asset quality and stabilising risk controls are supporting smaller banks and non-banking financial companies (NBFCs).
- Asset management companies: Stable systematic investment plan (SIP) inflows and operating leverage benefits support earnings visibility.
- Auto ancillaries: The commercial vehicle (CV) cycle is at the start of an upcycle, creating growth potential for suppliers.
- Consumption segments: Jewellery, value fashion retail and beverage businesses are showing steady demand alongside reasonable valuations.
- Manufacturing and capital goods: Completed capex cycles could translate into earnings growth as global trade dynamics improve.
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He said India’s manufacturing theme remains a long-term opportunity across multiple sectors.
Sachdev cautioned investors against sectors where valuations remain ahead of earnings growth.
“Sector bubbles are something one has to be careful about,” he said, pointing to themes such as EMS, defence and hospital stocks where prices have moved faster than fundamentals.
He also advised caution toward expensive new listings, noting that many IPOs are priced aggressively and may not offer adequate margin of safety for investors.
For the full interview, watch the accompanying video
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