This shift impacted our positioning disproportionately. The portfolio’s higher exposure to Europe and aerospace was a drag, with MSCI Europe correcting ~10% from peak versus ~9% for the S&P 500. Within holdings, GE Aerospace declined ~17% and Safran ~20%, reflecting concerns around airspace disruptions.

Such events are rare, our overweight in aerospace remains driven by medium-term fundamentals around aftermarket piece.

During the month, we also initiated exposure to defence and commodities, both of which were under evaluation for some time. Our base case remains that oil prices normalize and the broader economy avoids a meaningful slowdown, allowing the cyclical recovery to continue, though sustained high oil remains the key risk. Encouragingly, markets have begun to look past the immediate developments, and the portfolio has recovered part of the lost relative performance month to date.

What worked: Defensive exposures such as Republic Services and Berkshire held up relatively well and provided stability during the drawdown.

What did not: European exposure and aerospace were the primary detractors, with names such as GE Aerospace and Safran seeing sharp corrections alongside the broader weakness in MSCI Europe.

This deliberate shift away from our historical reliance on large-cap consumption, financials and IT services helps mitigate AI related risks to jobs and the domestic growth slowdown. Furthermore, allocations have been increased towards companies with higher expected growth, valuation re-rating potential and recent upgrades to consensus expectations. CCP remains a concentrated strategy with over 40% of the portfolio allocated to the top-5 positions. Total number of stocks currently in the portfolio is 19. Stock selection is still done basis the quality of the underlying businesses. Expected earnings growth over the next 3-5 years across all portfolio constituents is mid-teens or higher. In terms of forward valuation multiples, across more than half of the allocations, expected valuation changes are targeted to contribute positively towards portfolio performance. So far in Q1/Q2/Q3 FY26, the portfolio constituents delivered weighted average EPS growth of 10%/14%/17% YoY respectively.

Over the last 12 months, while Eicher, Astral, and Divis have been the biggest contributors to portfolio performance, CMS, Info Edge and Trent have been the biggest detractors.

Additionally, five consecutive years of FPI outflows led to a capital account deficit—the first since 2013—causing the Rupee to depreciate 5% against the USD and 19% against the Euro.

The BSE500 Index has now seen a 20-month time correction with zero returns since July 2024. While investors shifted to the safety of large-cap “value” stocks—led by a 53% surge in State Owned Banks—mid and small-caps faced significant pain, with median drawdowns of 33% over the past year. Our Portfolio lagged the index during this value rally. While we remain focused on long-term cash flow predictability, we recognize that the drivers of that predictability in India have evolved significantly in the post-pandemic era.

In general, our exposure to healthcare and financials have worked well over the past year while our exposure to industrials have proven to be a drag. The top-5 performers in the last one year were Eicher, Cholamandalam Inv., Narayana Hrudayalaya, HDFC Bank and Bajaj Finserv; top 5 detractors in the same period were Trent, L&T Tech Services, CMS Info Systems, Clean Science and Samhi Hotels.

Historically, sharp market corrections have created attractive entry points in capital market-linked businesses as valuations reset. We have selectively added to such names. Within this space, volatility-linked plays such as exchanges continue to demonstrate resilience.

While valuations across several stocks now offer improved margin of safety, incremental allocations have focused on businesses where price corrections have been sharp and confidence on FY27 earnings growth remains high. KCP currently trades at ~17x 1-yr forward earnings, near the lower end of its historical range. Key risks include a prolonged geopolitical conflict and elevated crude prices, which could create upside risks to inflation.

Over the last 12 months, top detractors in KCP were CMS Info Systems and Motilal Oswal. The top contributors to the portfolio over the last 12 months have been City Union Bank and MAS Financial Services.

Basis the last 3 months attribution ending on March 31, 2026– the biggest detractors have been IT stocks ( R Systems, L&T Technology Services) owning to concerns around impact of AI on their business models and Ahluwalia Contracts. On the other hand, highest contributors to the portfolios have been Acutaas Chemicals (strong beat in 3QFY26 results), Natco Pharma (a relatively new addition in the portfolios) and Stylam Industries (open offer by Aica Kogyo providing support to the share price).