Fund manager insights: Jitendra Sriram on sectoral bets and portfolio balance for investors

In an environment of changing policies, tax reforms, and global uncertainty, investors are taking a fresh look at how their portfolios are positioned for the long haul. Budget 2026 has accelerated this shift, putting manufacturing and infrastructure back in the spotlight and influencing market behaviour through changes to taxation and capital allocation.

Managing large-cap, manufacturing and business-cycle–oriented equity strategies, along with aggressive hybrid and multi-asset funds, he also offers practical insights on navigating volatility, balancing risk across asset classes, and building resilient portfolios in an increasingly complex global environment.

To our mind, the Union Budget was a relative non-event given that much of the heavy lifting, through tax cuts and GST rationalisation, was already done in the previous year’s Budget and during the mid-year of FY26. The emphasis on manufacturing and making industry more future-ready was heartening.

MAT (Minimum Alternate Tax), becoming a final tax, has a limited impact on frontline companies, as most already pay taxes above MAT levels. However, companies that were enjoying exemptions or specific incentives and paying MAT will no longer be able to carry forward credits, which is marginally negative for some. On the other hand, changes in share buyback norms are positive, making buybacks more attractive for non-promoters and even employees holding ESOPs.

Consumer discretionary (benefiting from GST-related measures), healthcare, and utilities remain key growth sectors from a long-term perspective. In the near term, certain tariff-impacted sectors, such as textiles, gems and jewellery, and marine products, could see tailwinds from the Indo-EU and Indo-US trade deals.

The government’s focus on manufacturing, particularly its recognition of critical raw material shortages and vendor supply chains, underscores the importance of this space. The increase in capital spending to ₹12.2 trillion further reinforces this intent.

From an evaluation standpoint, we look at a combination of demand-supply dynamics, local value addition, competitiveness, and valuations relative to growth. Currently, we are more positive on companies linked to power generation, transmission and distribution (T&D), and infrastructure, rather than industrial capex-oriented plays or consumer electrical segments.

The Budget has placed significant emphasis on carbon capture across five core sectors, power, refining, steel, cement, and chemicals, to make them future-ready. Additionally, long-term tax reliefs announced for AI and data centre investments (till 2047) and nuclear power (till 2035) provide tax stability for both global and domestic investors. As details emerge, investment momentum in these areas will be key to watch.

In the near term, rather than a one-way rise in yields, we are seeing a marginal steepening of the yield curve, with the shorter end easing and the long end hardening mildly.

Multi-asset funds offer a good way to gain exposure to precious metals, especially gold. Since equity allocations typically exceed 65%, these funds also provide tax-efficient access to such exposures. That said, allocation levels should be guided by individual risk tolerance and are best determined in consultation with a financial advisor.

Buybacks are largely at the discretion of companies rather than individual investors. However, if an employee, particularly a non-promoter, has the option to structure part of their compensation through stock grants, it may make sense to defer exercising or monetising them into the next year, especially if the company is on a strong growth trajectory.

Risk tolerance varies widely based on age, proximity to retirement, planned expenses (such as education, marriage, or home purchases), and whether investments are meant to supplement income or deploy surplus capital. Large-cap funds represent the best of Indian industry and are among the lower-volatility equity segments, making them a core portfolio component.

While allocations across large, mid, and small caps may vary, sectoral and thematic funds should typically be tactical exposures aimed at capturing specific trends and therefore form a smaller portion of the overall portfolio.

Under normal circumstances, investors should reassess their objectives and evolving risk tolerance at least once every five years. However, significant changes—such as shifts in taxation policy or major global events—may necessitate an earlier review.

The old saying still holds: time spent in the market is more important than timing the market. First-time investors should start small and experience the journey. As clarity around risk tolerance improves, they can make more informed decisions about shaping their allocations across debt, hybrid, and equity investments.

Global developments and events in China are particularly important for export-sensitive sectors such as metals (which are largely global price-takers), crude oil-linked businesses, and chemicals. Their impact is relatively lower on domestically oriented sectors like banking or consumer staples. However, in an interconnected global economy, no sector is entirely insulated, as changes in global financing costs or raw material prices can have broader implications.

Disclaimer: This article is written purely for informational purposes and should not be considered investment advice from Upstox. Investors should do their own research or consult a registered financial advisor before making investment decisions.