June 2026 / Q1 FY27

02The Discipline Behind the Rebound

Staggered buying sits at the centre of how we manage risk and build the portfolio. A good company can still give a poor result if a position is built too quickly or at the wrong price. This matters even more in small- and mid-cap stocks, where liquidity can change quickly and a large order can move the market.

We add in stages. The size and timing of each purchase depend on our conviction, market liquidity, the position already held, and cash available. There is no fixed deployment schedule.

Cash is what turned the correction into an opportunity rather than a threat. Because we carried a buffer into the fall, we could keep adding as businesses got cheaper instead of being forced to sell to raise liquidity. That let us hold through a 34% drawdown with conviction and stay fully positioned for the 34% recovery in Q1 FY27.[4]

Staggered Buying in Practice

Three current holdings show this discipline in action. We have withheld the names so the pattern, not the stock, is the point. In each case we bought steadily through the January–March 2026 weakness and let the position build as prices recovered. Each chart overlays the month-end market price, our weighted purchase price, and the capital deployed across client accounts each month.

All accounts follow the same investment view, but trades are sequenced according to each account’s existing exposure and prevailing liquidity. Our scale allows us to build positions without forcing the same order through every account at once.

03A Narrower Opportunity Set

Investing in India from the pandemic through 2024 was unusually forgiving. Liquidity lifted market capitalisations, earnings rebounded, domestic flows grew, and multiples re-rated. Owning equities across the market was often enough. Over the past two years, earnings have slowed, uncertainty has risen, and valuations remain high across much of the market.

Our valuation work points to four conclusions.

3AThe Easy Money Has Been Made

Even after the correction, large parts of the market continue to trade at or above their long-term averages. Under our FY27 earnings assumptions, only small- and micro-caps move marginally below their ten-year median valuations. Large- and mid-caps remain expensive.[2]

The margin of safety is thinner than in the previous cycle. From here, returns must be supported by earnings delivery.

3BCheap Sectors Are Becoming Scarce

Only a handful of sectors screen below or close to their historical valuation bands. IT, hospitality, FMCG, chemicals, and select financials appear relatively more reasonable. Broad bargains are increasingly difficult to find.[2]

3CMarket Breadth Has Narrowed

A large share of listed companies still trade above 30x trailing earnings. High valuations are not a problem by themselves; high valuations combined with slowing earnings growth are. That combination compresses the opportunity set and leaves little room for execution mistakes.

The valuation picture remains demanding even after allowing for growth. Median PEG ratios for large- and mid-cap companies remain above 2, while small caps remain above 1.[2]

3DValue Still Exists, but the Cohort Is Small

Opportunities remain for investors willing to examine business models, competitive positioning, management quality, and cash generation. In many of our focus sectors, fewer than one in five companies combine a P/E of 20x or less with PAT growth of at least 20%.[2]

04How We Intend to Generate Alpha

4AThink Like Owners, Not Traders

A low P/E alone does not make a good investment. Some businesses are cheap because their earnings outlook is deteriorating; others trade at a premium because they have durable advantages and allocate capital well. The work is to know the difference.

We study earnings quality, balance-sheet strength, competitive position, management quality, capital allocation, and free cash flow. In one holding, management invested in manufacturing capability before the benefits appeared in reported numbers. That capability improved margins and helped the company gain market share through higher volumes. The investment case rested on the economics of the business, not on a low headline multiple.

4BBe Patient When the Thesis Is Intact

When expectations are high, a small earnings miss can cause a large fall in the share price. The risk is greater when returns on capital are weakening at the same time. We therefore judge the thesis by business performance, not by the market’s willingness to sustain a high multiple.

Our investments in solar pumps and railway signalling did not progress in a straight line. The businesses needed time to convert opportunity into earnings; market recognition came later. Patience is justified only while fresh evidence continues to support the thesis.

4CPrefer Selection to Broad Exposure

Going forward, alpha will come from businesses that can grow earnings consistently at sensible valuations. This calls for deeper research, valuation discipline, and patience when opportunities are scarce.

When the market was driven by momentum, we stayed focused on stock selection and avoided chasing trends. That discipline helped protect capital through the difficult conditions of the past two years. It is also the approach the next phase demands.

05Outlook and Strategy

After the recovery in stock prices, earnings will matter most from here. Management commentary in the coming results season will help us judge demand, margins, and the outlook for the rest of the year.

A softer first quarter was already expected in several sectors because of the oil and supply-chain shock discussed in our March 2026 letter, higher raw-material costs, and trade disruption. With valuations higher again, weak earnings or guidance could lead to another correction.

Despite tariffs, conflict, one-off labour costs and softer government spending, our portfolio companies still delivered about 10% PAT growth in FY26.[3] The coming year is set up better, and the portfolio’s valuation remains in line with its long-term average.[1]

Our focus stays where it has always been: earnings growth, sensible valuations, and careful stock selection.

5AFund Closure: Final Call

Equitree follows a growth private-equity approach in public markets. We cap the strategy at ₹2,000 crore of AUM or 5% ownership in our portfolio companies, whichever comes first, so we can build meaningful positions.

Market conditions over the past 20 months helped us build 5% stakes in several portfolio companies with less capital than we first expected. AUM is now ₹1,550 crore as of July 22, 2026.[1]

We expect to accept about ₹100 crore more. After that, we plan to pause new investor inflows and top-ups to protect liquidity and keep the strategy focused.[1]

The cap helps us keep positions meaningful, stay liquid, and leave room for future ideas. We will keep compounding the existing portfolio and researching the next set of businesses that meet our standards.

Thank you to our investors, partners, and well-wishers for your continued trust. We are grateful for your confidence in Equitree.

Sources

1. 01

   Equitree Capital data, July 2026, including AUM as of July 22, 2026. Portfolio returns, AUM, FY27E valuation, expected earnings growth, and corpus-cap disclosure.

2. 02

   Ace Equity and Equitree Capital internal valuation analysis, data as of June 30, 2026. Universe excludes BFSI; segment definitions and earnings assumptions are stated below the relevant tables.

3. 03

   Equitree Capital internal portfolio model and management commentary, Q1 FY27. FY26 portfolio-company PAT growth and operating context.

4. 04

   Equitree Capital portfolio, cash-allocation and transaction data through June 30, 2026. Includes fund-level monthly deployment, split-adjusted transaction prices, portfolio drawdown and Q1 FY27 recovery.

5. 05

   SEBI circular SEBI/HO/IMD-PoD-2/CIR/2022/172), December 16, 2022.