June 2026 / Q1 FY27

01The 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, guided by our investment view, market liquidity and the position already held. The pace is deliberate rather than fixed, helping us respond to opportunity while keeping risk and cash levels in balance.

The chart shows how cash supported that approach. Month-end cash moved between 10.9% and 17.7% as prices, liquidity and the number of attractive ideas changed. This gave us room to keep buying while the portfolio went through a 34% maximum drawdown, and to stay invested as it recovered 34% in Q1 FY27.[4]

Staggered Buying in Practice

Three holdings show how this worked. We have left out the company names so the focus stays on the buying pattern. In each case, we added during the weakness of January to March 2026 and continued to assess the position as the price recovered. The charts combine the month-end market price, our weighted purchase price and the capital deployed across client accounts each month.

One Investment View, Tailored Execution

Every account follows the same investment view, while timing and position size reflect its starting point and market conditions. Our boutique scale lets us build portfolios with care, rather than apply the same trade to every account at once.

02Where Is the Alpha in Today’s Market?

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.

2AThe 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.

2BCheap 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]

2CMarket 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]

2DValue 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]

03How We Intend to Generate Alpha

3AThink 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.

This means understanding earnings quality, balance-sheet strength, competitive position, management quality, capital allocation, and free cash flow. In one of our holdings, the market initially overlooked management’s focus on building a manufacturing edge. That capability improved margins and helped the company gain share through higher volumes. Looking closely at the business made the difference.

3BBe Patient When the Thesis Is Intact

Today’s market is less forgiving. Companies that miss expectations are punished quickly, and businesses with weakening return ratios are seeing valuations compress. Earnings matter more than stories.

Earnings growth is rarely linear. We saw this in our investments in solar pumps and railway signalling: the thesis took time to play out, and the gains followed as earnings improved. Patience works when the research stays current and the thesis remains intact.

3CPrefer 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.

04Outlook 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.

Our portfolio companies delivered about 10% PAT growth in FY26, despite tariffs, conflict, one-off labour costs, and softer government spending.[3] For FY27, we expect 20–22% earnings growth. The portfolio trades at about 16.5x FY27E earnings, close to its ten-year median of 16.4x.[1]

We are focused on earnings growth, sensible valuations, and careful stock selection.

4AFund 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.