He pointed out that while last year’s economic slowdown pushed capital to a limited number of high-growth companies, the environment is now beginning to turn. “Look, last year, when the economy was doing poorly and these so-called names were doing exceptionally well in terms of revenue growth, at least there was visibility into growth and money was being shifted. And now the reverse trend has just started, and it could gain momentum in 2026,” he added.Despite the cautious stance on busy themes, Tandon says his portfolio strategy is not about holding excessive amounts of cash. “No, we’re not sitting on a ton of money. We’ve deployed some of these names that I talked about in the sectors that we like, so we’re more interested in the legacy companies, the legacy companies that have been beaten down, that have underperformed the market, the valuations are attractive, and if they’re not in the hated area, they’re not definitely in the admired area,” he said.
He believes such ignored names could outperform as liquidity conditions tighten. “People don’t like some of these names, people don’t even want to discuss these names. So those are the names that I think will do better in 2026 and they are more liquid, they are safer,” Tandon said, adding that liquidity, safety and returns form the core hierarchy of his investment approach.
He highlighted risks related to the market’s microstructure, warning that rising impact costs and shrinking volumes are creating friction for investors. “Market impact costs have been around for almost a year and a half now and are still high, volumes are shrinking… if you want to get out there is a huge cost, if you want to build your exposure there is also a cost,” he noted.
On defense stocks, Tandon acknowledged the long-term strategic value of the sector but flagged valuation risks. “Defense as a space is absolutely very good… but the challenge of the sector is that nothing is very cheap, the price is experiencing extraordinary growth and it is already built into some of these prices,” he said, describing the space as a “buy on dips” opportunity rather than a new entry at current levels. He remains constructive but cautious on metals, citing global uncertainties. “The only challenge is that when you are in a very difficult global environment… there are a lot of things that don’t give you comfort to build a very sizable position,” Tandon said, adding that while not negative, exposure needs to be calibrated.
However, medicine stands out as his strongest belief. “Let’s understand, pharma, I always say we are in a similar situation as we were 20 years ago,” he said, highlighting India’s dominance in generics, US FDA-approved factories and expanding capabilities in CDMO, biologics and new therapies.
“I think these are the data points that give us a big lead over China and that is why we think there is no substitute for Indian pharma companies and that is why they will remain a bull thesis in the long run,” Tandon said, calling it a 10-year opportunity with limited downsides and meaningful upside.
Within financial services, he sees selective opportunities beyond PSU banks. “From a relative perspective within the financial sector, NBFC has done well… and another area that I have been highlighting for a while is on the insurance sector,” he said, adding that life insurance companies in particular are coming out of a neglected phase with improving fundamentals.
When asked to identify one clear sectoral bet for 2026, Tandon’s answer remained unchanged. “So, like I said at the beginning… pharmaceuticals is a no-brainer business,” he said. “My downside is protected, the global backdrop is constructive… this is a very simple transaction that we should participate in, we should remain overweight in the pharmaceutical sector.”
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