Best earnings in 6 quarters for broader market
Agarwal highlights that despite muted GST trends and concern over economic softness, the Nifty 500 delivered a robust 16% year-on-year earnings growth, the strongest in six quarters. “Given this data was till 30 September, the benefits of GST rate cuts from October will further boost consumption and margins,” he says.
Why Alchemy has 63% allocation to midcaps
Alchemy’s Smart Alpha 250 portfolio currently holds 63% exposure to midcaps, a stance driven by fundamental earnings strength. While largecaps have posted six straight quarters of single-digit growth, midcaps delivered 20–25% earnings growth in four of the last five quarters.
Agarwal argues that despite midcaps trading at a 27x forward PE—a 35% premium to Nifty—the PEG ratio tells a different story.
Nifty PEG: 2.0
Midcap PEG: 1.3“This shows midcaps offer growth at far more reasonable valuations,” he notes.
Sector preferences: PSU banks, financials, defence, power
Alchemy remains overweight in sectors showing strong and sustained momentum:
- Financials: PSU banks, small private banks, and capital market players continue to post high-quality growth.
- Defence & power: Both sectors enjoy strong order books and multi-year visibility.
- Metals: Supported by supply constraints, falling global inventories, and China’s production caps.
- Consumer discretionary & tech aggregators: Benefiting from structural demand and platform scalability.
Earnings outlook remains strong
With GST tailwinds, festival-season demand, and policy clarity, Agarwal expects the next two quarters to register stronger growth. Midcaps—especially those in financials, power, defence, and capital markets—are likely to lead the next phase of the rally.