Fourth quarter results could lead to a selective recovery in the market: Daljeet Kohli

Amid increased volatility and sharp stock-specific reactions to gains, Daljeet Kohli advocates a disciplined bottom-up investment strategy, arguing that broad sectoral or thematic investments may not work in the current environment.Speaking to ETNow, Kohli noted that market diversification has increased significantly, with companies being rewarded or punished purely on quarterly performance. Stocks that disappointed in the third quarter were “beaten like anything,” while those that delivered strong numbers saw meaningful traction.

“Wherever the numbers are good, we’ve seen some traction there. We believe that probably the way the third quarter numbers have gone for the broader market, the fourth quarter will also be better numbers and therefore the market will start to recognize and take advantage of these good numbers,” he said. Highlighting the performance of his portfolio, Kohli revealed that across 30 holding companies, revenue growth was close to 20%, EBITDA growth was 29% and PAT growth was 40%. These strong earnings results led to an outperformance of four to five percentage points versus the broader market, especially after a sharp decline in December and January, followed by a strong recovery in early February.

On microfinance-related stocks, Kohli acknowledged that the sector has faced persistent challenges over the past two years. While regulations have begun to stabilize and regional issues in states like Karnataka and Tamil Nadu have been subsiding, new concerns from Bihar have increased pressure. He explained that microfinance institutions (MFIs), which target vulnerable segments of borrowers, remain exposed to regulatory and political interventions.

While the regulations technically exclude registered NBFCs and banks, the reality on the ground makes the distinction difficult during collections, impacting sentiment and growth expectations. Kohli favors companies moving from pure MFI exposure to more diversified lending models, such as small finance banking structures. However, he warned that northern-based lenders with greater regional exposure could face continued pain in the short term.

On the IT sector, Kohli remains cautious despite significant valuation corrections. He believes much of the derating has already taken place, but the uncertainty surrounding AI-induced disruption and global demand, especially in the US, makes deploying fresh capital premature. While management commentary has become optimistic, he emphasized that execution remains the most important variable.
“We believe that there are other, relatively better sectors available at the moment, so you should look at those sectors rather than going into this,” he said.

The crucial question, he says, is whether IT companies can adapt AI to improve efficiency without undermining billing revenues. If AI reduces manpower needs for customers, companies must demonstrate cost savings that translate into stable or improved margins. Kohli prefers to wait for tangible evidence in quarterly earnings before reconsidering exposure.

On the automotive front, Kohli expressed a clear preference for commercial vehicles (CVs), citing strong recent data and positive momentum for OEMs such as Tata Motors and Ashok Leyland. However, instead of investing directly in large OEMs, he prefers mid-cap accessories, including forging companies, axle makers, spring makers and CV-focused tire players.

In two-wheelers, he sees TVS Motor as a standout in all segments, including electric vehicles, and prefers allied companies to benefit from its growth.