Are Q2 earnings downgrades already factored in? DSP Mutual Fund's Abhishek Singh explains

As a sluggish Q2 earnings season is leading to downgrades in many stocks, Abhishek Singh, Fund Manager, DSP Mutual Fund, says the market is not factoring in the medium-term outlook yet for most of the stocks.

«Markets could be justified in this stance if we see sustained improvement in the coming quarters,» he says. Edited excerpts from a chat:

In your DSP Top 100 Fund, you typically have a concentration of around 30 names. How have you been tweaking your portfolio in the last few months amid all the concerns around valuation and earnings growth slowing down?

I've been cautious about valuations for some time. Revenue growth had been slowing for several quarters, and now even profits are lagging. I haven’t had to make major adjustments to my portfolio, as I've maintained a conservative stance. I steer clear of sectors with high growth expectations that are already being priced at premium valuations. Disappointments in these segments are often penalized sharply. In a relatively concentrated portfolio, limiting downsides is what matters most. From my experience, even company management and promoters are sometimes surprised by the upside in their businesses. Upsides are hard to know. My focus remains on minimizing potential downsides.

There has been a bit of correction in the last few weeks. Did you use it to increase allocation and buy some of the stocks available at relatively attractive valuations?

I've made a few adjustments to the portfolio, but nothing major. I focus on businesses I want to buy and the