How can your portfolio outperform markets? Sandeep Neema shares strategy

The next phase of returns in Indian equities will be increasingly driven by companies demonstrating strong earnings visibility, says Sandeep Neema of PL Capital

The prolonged weakness in the markets reflects a ‘healthy normalisation of flows’ after a strong multi-year rally, says Sandeep Neema, director at PL Asset Management. In an email interview with Nikita Vashisht, Neema said investor interest is rising in multi-asset investing amid bouts of volatility. Besides, sectoral rotation and bottom-up stock selection remain key to generating alpha in this market. Edited excerpts:

 

How can investors generate alpha returns in this market?

 

The ongoing phase of consolidation reflects a healthy normalisation following a strong liquidity-driven rally over the past few years. In such environments, alpha generation typically shifts away from broad market beta toward disciplined bottom-up stock selection.

 

The next phase of returns in Indian equities will be increasingly driven by companies demonstrating strong earnings visibility, balance-sheet strength, and the ability to benefit from India’s structural growth drivers such as financialisation, manufacturing, infrastructure, and domestic capex.

 

Selective sector rotation can add meaningful alpha, driven by improved earnings and reasonable valuations, particularly as leadership shifts toward domestic cyclicals and investment-led sectors.

 

While maintaining tactical elevated cash levels is a good short-term strategy, given the risks ahead, it is unlikely to be an optimal long-term strategy.

 

What has been your reading of the December 2025 (Q3FY26) quarter results? Is earnings growth at risk in FY27 given the global uncertainty?

 

Q3FY26 results indicate a more differentiated growth profile across sectors, with domestic-oriented sectors such as financials, capital goods, and infrastructure continuing to demonstrate healthy momentum, while certain export-linked and global cyclical sectors experience more modest growth.

 

While global macro uncertainty may result in periodic earnings volatility, we do not view this as a structural slowdown in India’s earnings cycle. Strong domestic demand, sustained public capital expenditure, improving private investment activity, and robust credit growth continue to provide structural support to corporate earnings.

 

Could the regulatory noose around capital market funding and derivatives trading dampen market participation?

 

India’s regulatory approach has historically been proactive and calibrated, with a clear focus on strengthening market integrity and ensuring long-term financial stability. The recent tightening around derivatives participation and capital market funding is a prudent step aimed at improving risk management, reducing excessive speculative leverage, and aligning market activity with underlying economic fundamentals.

 

While these measures may moderate short-term speculative participation, particularly from leveraged retail segments, they are unlikely to dampen structural investor participation. In fact, stronger regulatory oversight enhances institutional confidence, improves market quality, and reduces systemic risks. Over the medium-to-long term, such regulatory strengthening supports the development of a more resilient and mature capital market ecosystem.

 

Do you think the recent tightening of norms for AMCs and distributors could affect profitability for the sector?

 

These measures may result in some near-term adjustments in distribution economics and operating models, they are unlikely to structurally impair profitability for well-established asset managers and PMS providers. Institutions with strong investment performance, scalable platforms, and differentiated capabilities will continue to attract flows and maintain healthy operating leverage.

 

Over the long term, regulatory strengthening typically leads to greater industry consolidation, improved investor confidence, and a more stable and credible asset management environment, which ultimately supports sustainable growth.

 

What new product categories (multi-asset, thematic, passive) are seeing strongest traction among investors in this market?

 

We are observing growing investor interest in multi-asset strategies, driven by their ability to provide diversification, manage volatility, and deliver more stable risk-adjusted returns across market cycles. These strategies are particularly relevant in environments characterised by higher earnings dispersion and evolving sector leadership.

 

Passive strategies continue to see steady adoption due to their cost efficiency and accessibility, particularly for core market exposure. However, active management remains highly relevant in India, given the depth of stock-specific opportunities and the potential to generate meaningful alpha through research-driven investing.

 

Thematic strategies are also attracting interest, particularly in areas aligned with India’s structural growth, such as manufacturing, infrastructure, and defence.

 

PMS AUM has grown significantly over the past few years. Is this a structural migration from mutual funds or just a cyclical phenomenon?

 

The growth in PMS AUM reflects a structural progression in India’s investment ecosystem, driven by increasing investor sophistication, expanding high-net-worth wealth, and a growing preference for differentiated, actively managed strategies. Investors are increasingly seeking greater transparency, customization, and access to high-conviction portfolios that are designed to deliver superior long-term risk-adjusted returns.

 

PMS serves as a complementary allocation alongside mutual funds, providing the flexibility to construct focused portfolios aligned with specific investment objectives and market opportunities.  We expect PMS to remain a structurally growing segment, particularly among investors seeking differentiated alpha and a more tailored investment approach.