Rajguru said markets are currently pricing growth very differently, with companies delivering 30-35% growth continuing to command high valuations, while stocks with earnings growth below 10% are facing pressure. His strategy is therefore to balance valuation comfort with businesses where earnings growth remains strong.
“The strategy which you are adopting is a barbell strategy,” Rajguru said, adding that private-sector banks could provide the value component while capital goods, capital-market and manufacturing businesses could provide the growth component.
A barbell strategy balances lower-valued, relatively stable stocks with high-growth opportunities, while avoiding the middle ground.
Private-sector banks have been derated significantly and some are now trading at valuations not seen for a long time, Rajguru said. He believes this creates an opportunity, particularly as the market eventually looks for a floor in these stocks.
Within the growth bucket, he sees opportunities in capital goods, capital-market businesses and manufacturing, where there is visibility of 30-35% growth. However, he cautioned investors against paying excessively for that growth.
On the broader market, Rajguru said sentiment remains extremely weak, with technical levels also being breached. But he pointed to valuations as a potential source of comfort, noting that the market is trading at below 18 times 2026-27 (FY27) earnings and around 16 times 2027-28 (FY28) earnings.
“If you have invested money during that time, that has turned out to be a good entry price,” he said, referring to periods when Indian markets have corrected because of macro or external shocks.
For the near term, crude oil remains an important trigger. With oil prices around $105-$107, any positive development around a ceasefire or peace deal could provide some relief to markets, Rajguru said.
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On HDFC Bank, he does not expect a major immediate reaction when the new CEO is announced. However, removing leadership uncertainty would allow investors to focus on the bank’s growth roadmap. If the bank delivers 13-15% growth from current valuations of around 1.5 times forward price-to-book, Rajguru sees scope for returns over the next two to three years, with further upside possible if a re-rating follows.
Rajguru also sees insurance as a potential contrarian opportunity after years of underperformance and regulatory pressure. Within the sector, he currently prefers general and health insurance over life insurance, although further correction in life insurers could make them more attractive.
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