Market veteran Shailesh Raj Bhan, with a great track record, is not one to chase short-term trends in the market. Nippon India has the largest small-cap fund in the mutual fund industry, valued at Rs 61,646 crore and has given a stellar return of 22.16 per cent since inception. Despite this, Nippon AMC CIO Sailesh Raj Bhan has said that the value lies elsewhere. In an exclusive conversation with Moneycontrol, Nippon AMC CIO Shailesh explained why he is supporting large caps and what his blue print is for 2025.

What worked for you in 2024 and what didn't?
2024 was a consolidation year. It was driven by a disciplined approach to avoid overpaying for sectors that were driven by growth and momentum. We started the year believing that starting with high valuations leads to low returns. Our focus on a large-cap-biased portfolio, which was less bullish in the market, paid off. The surge in thematic investing created an excess in the market that we deliberately ignored. A cautious approach at the start of the cycle hurt our initial performance, but it worked to our advantage as the year progressed. What is your view on 2025? The massive sell-off in overseas markets in the past months has made valuations even more reasonable. At the start of 2024, valuations appeared overvalued, especially ahead of the elections. Later, FII selling and the post-election rally normalised valuations. Earlier, a horizontal bull market driven by flows on fundamentals made fund management challenging, but now the situation is changing. We see winners changing. Sectors that have performed well in the last two to three years may no longer be able to lead the market. For example, the capital goods sector, which has high valuations, is seeing a moderation in its performance despite good earnings contribution. Earnings will bounce back in FY26, especially in the small and mid cap sectors. What kind of preparations have you made for 2025? Starting valuations are important - higher starting points often result in lower IRRs, even if earnings results are good. We are focusing on sectors with favourable risk-reward and uncompromising quality. Today, large caps are offering better stability, which makes them attractive. We are positioning in sectors where growth expectations are low. We are expecting a positive surprise, especially in quality companies that have seen valuations improve. Are you confident that earnings will bounce back in FY26? We are fairly confident about it. We expect 12% growth in FY26. Currently, the consensus is 14-15% growth. However, we think it will be slightly lower. The weak earnings in one or two quarters were partly due to last year's high base effect and the ongoing slowdown in the market. We think the economy will bounce back, provided there are no major global disruptions. Are you positive on large caps? What if FIIs continue to sell more?