NewsStocksMarket Correction Creates Selective Buying Opportunities as Largecaps Offer Better Earnings VisibilityMarket Correction Creates Selective Buying Opportunities as Largecaps Offer Better Earnings Visibility
Quantum AMC's Christy Mathai identifies selective buying opportunities emerging from the recent market correction, particularly in smallcap stocks where nearly two-thirds have posted negative returns. While maintaining a largecap focus for better earnings visibility, the fund follows a bottom-up approach with financials as the preferred sector. Quantum remains cautious on high-valuation sectors like FMCG and autos, while viewing real estate as increasingly attractive after recent corrections.
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The recent correction across midcap and smallcap stocks has created selective buying opportunities, though largecaps continue to offer superior earnings visibility over the medium term, according to Christy Mathai, Fund Manager–Equities at Quantum AMC. Speaking in an interview with ET Now, Mathai highlighted how the broader market pain has been significantly deeper than headline indices suggest.
Market Correction Creates Bottom-Up Opportunities
While headline indices have delivered moderate returns in calendar year 2025, the impact on smaller stocks has been substantial. The correction has particularly affected the smallcap universe, creating opportunities for selective stock picking.
| Market Segment | Performance Impact |
|---|---|
| Smallcap stocks with negative returns | Nearly two-thirds |
| Smallcap stocks down more than 20% | Over one-third |
| Investment approach | Selective bottom-up stock selection |
"Corrections of this nature always throw up opportunities. We have selectively added to some beaten-down smallcap names such as cash logistics companies, but our core positioning remains tilted towards largecaps where earnings visibility is stronger over the next two years," Mathai explained.
Bottom-Up Strategy with Focus on Financials
Quantum AMC continues to follow a bottom-up investment approach, emphasizing valuation comfort and forward growth visibility. The fund house maintains financials as its preferred sector from a two-year perspective, supported by stable earnings momentum.
| Investment Criteria | Details |
|---|---|
| Margin of safety requirement | At least 20% to intrinsic value |
| Preferred financial segments | Large banks and select insurance companies |
| Investment timeframe | Two-year perspective |
| Key factor | Stable earnings momentum |
"We continue to find value in large banks and select insurance companies. Our approach requires at least a 20% margin of safety to intrinsic value, and financials still meet that criterion," Mathai noted. The fund has also selectively added to pharmaceutical and logistics stocks while reducing exposure to sectors where valuations already reflect strong volume growth.
Cautious Stance on High-Valuation Sectors
Quantum AMC has adopted a cautious approach toward several sectors due to valuation concerns. The fund has reduced exposure to autos after strong volume growth and valuation re-rating, though it maintains select two-wheeler mass-market positions.
| Sector | Valuation Metrics | Growth Rate | Fund Stance |
|---|---|---|---|
| Large FMCG | 50-60 times earnings | 7-8% EPS growth | Cautious |
| Autos | Post re-rating | Strong volume growth | Reduced exposure |
| Internet/New-age | High valuations | Faster growth | Outside investment universe |
"Large FMCG companies are trading at 50–60 times earnings, while EPS growth is closer to 7–8%. This suggests the risk of a prolonged time correction rather than meaningful upside," Mathai observed. Internet and new-age companies remain outside Quantum's investment universe despite faster growth prospects due to high valuations.
Metals Rally Priced In, Realty Becoming Attractive
Regarding the metals sector, Mathai believes much of the recent optimism is already reflected in current valuations. While acknowledging improved balance sheets and benefits from safeguard duties for ferrous players, the fund remains cautious at current levels.
The real estate sector presents a different picture, with recent corrections making valuations increasingly attractive:
- Recent corrections of 30-40% in realty stocks
- Sector likely in the middle of its cycle
- Value holding up despite moderated volume growth
- Market-specific risks remain a consideration
"Metals have done well, but global prices will drive returns from here. We are either holding steady or trimming positions after the recent run-up," Mathai explained. On real estate, he added, "Realty is becoming interesting again, though market-specific risks remain. We are closely tracking the space."
Selective Approach for Medium-Term Returns
Mathai emphasized that the current market environment favors disciplined, selective investing rather than broad-based allocation. The fund manager believes financials and largecaps offer the best risk-reward profile over the medium term, providing investors with better earnings visibility in an uncertain market environment.
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