DSP’s Vinit Sambre sees long-term value in small and midcaps

Small and midcap stocks continue to offer strong long-term opportunities, according to Vinit Sambre, Head of Equities at DSP Mutual Fund, a fund which currently manages $27.27 billion in assets.

Despite recent rallies in these segments, Sambre remains structurally positive. “One needs to keep a much more diversified and long-term view… a decent size allocation for the next 7–10 years is not an issue at all,” he said, stating the broader opportunity set available in these categories. He cited the example of the electronics manufacturing services (EMS) sector, which barely existed five years ago but has now created substantial market value, showing how new areas of growth keep emerging within the mid and smallcap space.

Another area of optimism for DSP is the rural and agri-linked economy. Sambre stated that sectors like agri inputs and speciality chemicals, which have gone through a tough cycle over the past 2–3 years, are now showing early signs of revival. He believes these segments, despite some global volatility, could offer solid multi-year returns as recovery builds momentum.

In the financial space, Sambre prefers non-banking financial companies (NBFCs) over banks in the near term. As interest rates fall, he expects NBFCs to benefit sooner due to the faster pass-through of lower borrowing costs. “The benefit of cost of funds will flow through maybe two quarters down the line,” he explained, adding that a low base will further support earnings growth.

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On the consumption front, DSP is taking a more cautious and diversified approach. Consumer demand trends are not uniform across segments, so the fund house prefers building a basket across categories such as white goods, quick service restaurants (QSRs), innerwear, and apparel. “Very difficult currently to understand the demand trends… so maybe it would be a good way to create a basket,” said Sambre.

He also flagged auto ancillaries as a contra opportunity. While original equipment manufacturers (OEMs) are seeing slower growth, several ancillary companies have expanded their product reach and built strong franchises. Sambre believes these players are well-positioned to tap into adjacent sectors like aerospace and defence.

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Overall, while near-term demand may remain uneven, DSP sees macro conditions gradually aligning in favour of growth. Factors such as tax cuts and softer interest rates are already in place, but the full effect might take a couple of quarters to play out. “The macro factors are now more conducive for growth versus last year,” Sambre said.

For the entire interview, watch the accompanying video

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