We’ve seen significant volatility in the past few months. After reaching record highs, Sensex and Nifty have seen sharp corrections. What are the key factors contributing to this, and is the worst over?
Mohit Khanna: Over the past five months, both internal and external factors have contributed to the market downturn. Domestically, valuations were high, GDP growth underperformed expectations due to multiple one-off factors, and corporate earnings remained weak for three consecutive quarters. Externally, rising U.S. bond yields led to FII outflows, and geopolitical developments, including Trump‘s tariff moves, added to the uncertainty.

Looking ahead, the next couple of months may remain unpredictable, but for long-term investors, this is an opportunity to accumulate fundamentally strong companies. Investors who enter during this period could see substantial returns in the next two to three years.

As we approach Q4 earnings, what impact do you expect on market sentiment?
Mohit Khanna: The last three quarters saw weak earnings, with single-digit growth in revenue and PAT. Q4 may also face challenges due to a high base from last year. However, quarter-on-quarter earnings should show some improvement.

More importantly, management commentary will be key. Starting Q1 FY26, we expect a more favorable base for earnings growth, aided by the budgetary allocations announced in the recent Union Budget. While Q4 may be tough, markets have already priced in much of the negativity.

How significant are Trump’s tariff policies for investors, especially in emerging markets like India?
Mohit Khanna: Trump’s policies aim to reset global supply chains in favor of U.S. manufacturing. However, other economies are responding proactively. China, for instance, is boosting domestic consumption through interest rate cuts, stimulus measures, and fiscal policy adjustments. This could reduce the risk of Chinese dumping in sectors like chemicals and metals, benefiting Indian markets.Europe is also increasing defense spending and exploring trade deals with India, opening new opportunities. While tariffs create short-term uncertainty, they also present investment prospects in select sectors.Which sectors or themes are you currently bullish on?
Mohit Khanna: In my midcap fund, I maintain a 21% exposure to financial services, with 15% in lending businesses and the rest in market infrastructure firms. While lending businesses remain attractively valued, near-term catalysts are lacking. However, market infrastructure firms could benefit from increased retail savings due to recent tax breaks.

I am particularly bullish on:

• Hospitals: Low penetration and rising income levels support long-term growth.
• FMCG: A strong consumption story makes it an attractive sector.
• IT: Offers defensive characteristics with pockets of good growth opportunities.

I am underweight on:

• Capital Goods: While the sector has strong order books, execution challenges persist.
• Oil & Gas and Chemicals: Market dynamics remain uncertain, though positions will be reviewed as conditions evolve.

In terms of themes, I have:

• 35% allocation to rural recovery and consumption, increased since September.
• 35% in defensive sectors like pharma, hospitals, IT, and FMCG.
• 20% in capital goods and infrastructure, where exposure has been reduced.

Midcap and smallcap funds have seen larger corrections than largecaps. What’s your advice to investors facing major losses?
Mohit Khanna: Market corrections are inevitable. The smallcap index is down 25%, midcap around 20%, and largecap around 15-16%. This is not the first or last correction in Indian equities.

Investors should:

1. Assess fund portfolios – Look at sectoral and thematic exposures to ensure they align with long-term trends.
2. Review fund managers’ track records – A strong historical performance indicates resilience.
3. Continue investing – SIPs allow accumulation at lower prices, benefiting from compounding over time.

In our midcap fund, we recovered faster than the index after a correction last year. The focus should be on funds that demonstrate strong recovery potential.

What’s your view on the capex and infrastructure sectors?
Mohit Khanna: The government has maintained capital expenditure levels, but lower incremental growth has concerned investors. Execution challenges in Q3 are likely to persist in Q4.

Investors should focus on companies with:

• Strong revenue visibility
• Large order books
• Efficient execution capabilities without excessive debt

While the sector has underperformed, well-managed companies should benefit from sustained government spending.

What’s your stance on the financial sector?

Mohit Khanna: Financials remain relatively cheap compared to historical valuations, but the lack of catalysts limits upside potential.

Key concerns include:

• Intense competition
• RBI’s actions on unsecured lending (though recent reversals have provided some relief)
• Potential margin pressures when interest rates decline

While valuations may have bottomed, fundamentals still need to stabilize. Hence, I am not taking an overweight position in the sector.

What’s your advice to investors looking to deploy fresh money in the markets?

Mohit Khanna: In our Purnartha One Strategy (multi-asset), we diversify across asset classes to mitigate risk. Our allocation:

• 70% equity
• 12-13% debt
• 5% gold
• 14-15% cash (to capitalize on upcoming volatility)

Investors should:

1. Diversify investments across asset classes.
2. Deploy funds gradually, avoiding lump-sum investments in volatile conditions.
3. Remain invested – Market cycles play out over time, and long-term strategies will yield results.

Hard times require discipline and research. Investors should focus on quality stocks, seek professional advice, and stay invested for long-term wealth creation.

Disclaimer: Please note that these are not recommendations. Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.