'Nifty's mcap composition causes it to trail broader earnings growth'

Abakkus' Sunil Singhania says India's changing economic structure could shift growth towards newer industries and smaller companies

India’s economic composition is changing and the next leg of growth will not necessarily be driven by the same set of companies, says Sunil Singhania, Founder, Abakkus Asset Manager. In an in-person interview with Abhishek Kumar in Mumbai, Singhania and Vaibhav Chugh, CEO of Abakkus Mutual Fund, share their views on the market correction, the evolving investment landscape and factors driving MF business growth. Edited Excerpts:

 

Equity markets have remained under pressure over the past two years, with volatility intensifying in the past week. What’s causing the extended time and price correction?

 

Sunil: 2020-2024 was an exceptional period as the equity market generated nearly 6 years’ worth of return in a 4-year period. So, the last two years have partly been a normalisation of the long-term return trend.

 

There have also been several headwinds. In 2024, economic growth weakened significantly. Then there were factors like global AI trade which led to money mostly flowing into markets such as China, Korea, Taiwan and Japan. Trump tariffs and the ongoing West Asia conflict were also a setback for the market.

 

However, domestically, things look much better now. Growth has recovered, supported by government measures like income tax and GST cuts. The RBI also infused substantial liquidity into the domestic economy. 

 

But, the elevated oil prices continue to weigh on the market. The question is how long the war premium on the oil prices will remain. If that premium eases, it would be a significant positive for India.

 

Can the weaker monsoons add to the pressure?

 

Sunil: The monsoon is currently below normal. However, the positive aspect is that sowing is still around normal levels. The more important factor is the output of the winter crop. If we have a very dry or hot winter, agricultural production could be affected.

 

Abakkus Mutual Fund has scaled up quickly since its launch in December 2025. What would you attribute this to?

 

 Vaibhav: There are several factors. First is the experience Abakkus has built on the alternatives side over the last eight to nine years, along with our Founder Sunil Singhania's experience of over three decades as an investment manager. The second is the effort we have put into communicating who we are, how we manage money and, importantly, how we manage risk. At the same time, we have been building relationships with distributors across the country.

 

Where has the growth primarily come from? How does the mix look between direct and regular? And which channels within regular contribute the most?

 

Vaibhav: Majority of our business is distribution-led. Within that, there is an interesting aspect: A lot of distributors are also giving money through registered investment advisors (RIAs) or platforms. So, while it may appear under a particular category, the underlying investment may actually be advised through a platform. Overall, the business is fairly diversified with the regular plan business coming from across channels including wealth managers, banks, national distributors and individual MF distributors.

 

Have these market conditions created opportunities for stock picking? Which market cap segment is most attractive currently?

 

 Sunil: Stock picking is always difficult. There are some pockets of the market that are completely neglected, while in other areas valuations have risen sharply. In some companies, price movements appear to be driven largely by Fomo-led (fear-of-missing-out-led) retail participation and momentum-driven buying. Overall, the market is transforming and the traditional large-cap, mid-cap and small-cap framework needs to be looked at differently.

 

Nifty currently consists of many good companies, but not all firms that have been successful historically will necessarily be the fastest-growing companies in the future. IT services may not be able to grow at high rates indefinitely. Consumer staples and oil and gas companies also have structural growth limitations.

 

At the same time, most emerging industries are currently in the mid-cap and small-cap segments. As a result, the composition of the Nifty can cause it to trail the broader corporate earnings growth.

 

Which sectors do you see participating in India's next phase of growth?

 

Sunil: India's economic composition is changing. The first trillion dollars of India's economy took around 60 years. During that period, public-sector enterprises played a major role because of the structure of the economy after independence. Steel, aluminium, power, coal, oil and gas, public-sector banks and other traditional industries were important.

 

Between $1 trillion and $4 trillion, private-sector banks, pharmaceuticals, IT services and consumption became much more important. As India moves from $4 trillion towards $8 trillion, the composition could change again.

 

In healthcare, instead of only generic pharmaceutical companies, we could see opportunities across Contract Development and Manufacturing Organisations (CDMOs), drug discovery, hospitals, medical technology (medtech), and diagnostics companies. In energy, alongside thermal power, there could be greater participation from solar, EVs and battery storage. Similarly, instead of only IT services, we could see platform companies, data centres and semiconductors.