Smallcaps return to favor as valuations become attractive: Siddharth Vora

After months of caution across the broader market, Siddharth Vora has turned increasingly constructive, arguing that the recent correction has reset valuations to more attractive levels and opened up opportunities in select smallcap pockets. Speaking to ET Now, Vora said that the sentiment has changed meaningfully in the last two months as the panic subsided and the market started to stabilise.

“So, actually, we’ve been quite constructive over the last couple of months, I would say, with the whole panic and the sharp selloff and the correction, the valuations have become attractive.” For about 15 months, his portfolio was mostly tilted towards largecaps and midcaps, with less than 10% exposure to smallcaps. That trend is now changing. “We are finally getting constructive on small caps as well and as we speak we are increasing small caps in our portfolio quite a bit.”

“Peak pessimism seems to be behind us now,” Vora added, while maintaining a disciplined sectoral approach prompting a gradual re-weighting towards smaller firms.

Metals, energy, materials continue to dominate

The main thesis driving his portfolio remains intact: Crude long, India short. “Metals are heavily weighted,” Vora said, adding that 25-27% of the portfolio is allocated to the sector, while another 5-7% is allocated to cement. Composite material exposure is approximately 30%, significantly above the benchmark weight.

Power, energy and utilities account for another 15% through names like Coal India, NTPC and Torrent Power. Pharma also accounts for 10-12% of the portfolio.

Within metals, Vora has a huge basket: “Tata Steel, JSW Steel, Hindalco, Nalco, SAIL, Hindustan Copper… Vedanta.” Both ferrous and non-ferrous themes, prices, supply constraints, currency trends and China dynamics enjoy tailwinds, he said.

IT still avoids the obvious

On IT, Vora said his models show little reason to be positive. “Valuations are not very cheap given the growth. Guidance has also been very weak. There is no momentum in the sector.” IT, he added, “doesn’t have enough legs for continuous movement.”

Turning contrarian on OMCs

Interestingly, he recently exited ONGC after the crude-linked rally unfolded, calling it an upside story given regulatory and tax risks. He believes that the opposite opportunity now lies with the oil marketing companies.

“It’s a good time to start looking at some of the contrarian plays around crude instead of playing on the Oil India, ONGC theme,” Vora said, citing decades of crude-market data that indicated strong equity performance after crude price peaks.

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