ETMarkets Fund Guide | Managing over Rs 8,000 crore: How Bajaj AMC's Sorbh Gupta picks winners in the Flexi Cap universe

Flexi Cap funds offer investors the freedom to participate across the market spectrum—from the relative stability of large-cap stocks to the growth potential of mid- and small-cap companies. Unlike some equity fund categories that have defined allocation requirements, Flexi Cap funds allow fund managers to dynamically shift investments across market capitalisations, sectors and themes based on changing opportunities and market conditions.

But this flexibility also makes the fund manager's role particularly important. Investors need to look beyond the Flexi Cap label and understand how effectively a fund manager is using this freedom to identify opportunities, manage risks and adapt the portfolio as market conditions evolve.

In this edition of ETMarkets Fund Guide, Sorbh Gupta, Head – Equity at Bajaj Asset Management, who manages over Rs 8,000 crore through the Bajaj Finserv Flexi Cap Fund, shares his approach to picking the right stocks across large, mid and small caps.


From identifying businesses positioned to benefit from long-term structural megatrends to evaluating business quality, earnings potential and valuations, Gupta explains the factors that shape portfolio allocation and the investment decisions behind the fund. Edited Excerpts -

Q) What exactly is a flexi-cap fund, and how does it work? How much freedom does a fund manager have to invest across Large, Mid and Small Caps stocks?

A) A Flexi Cap Fund is a diversified equity scheme that offers fund managers the flexibility to invest across Large, Mid and Small Caps stocks without any specific restrictions on allocation between these segments.

While SEBI has categorised mutual fund schemes based on their asset allocation requirements, the key advantage of a Flexi Cap Fund is that the fund manager has complete discretion to dynamically move across market-cap segments.

This flexibility allows the fund manager to adjust portfolio allocation depending on prevailing market conditions and investment opportunities.

Unlike categories with predefined allocation requirements, a Flexi Cap Fund can change its exposure to Large, Mid and Small Caps stocks based on the fund manager's assessment of the market, sectors and emerging opportunities.

Q) Who is the ideal investor for a flexi-cap fund? What investment horizon and risk appetite should someone have before considering this category?

A) A Flexi Cap Fund can be considered by investors looking for a diversified equity investment with the flexibility to participate across Large, Mid and Small Caps segments.

Since the fund can dynamically manage its exposure across these categories, along with different sectors and themes, it offers considerable flexibility in navigating changing market environments.

From an investment horizon perspective, a minimum period of three years is generally indicative for equity investing. However, given the diversified nature and flexibility of the category, investors should ideally approach it with a longer-term perspective.

An investment horizon of five to ten years can be suitable, allowing the fund manager sufficient time to dynamically manage allocations across market-cap segments and capitalise on opportunities as they emerge.

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Q) How should investors evaluate a Flexi Cap Fund?

A) The important thing investors should consider when looking at a Flexi Cap Fund is whether the fund is truly using the flexibility that the category offers or if it’s just carrying the Flexi Cap name without doing much.

Investors need to look at how the fund manager shifts investments, between Large, Mid and Small Caps stocks depending on what’s happening in the market. They should also check how the fund changes its focus across sectors adjusts to trends and adapts its investment plan as market conditions change.

Because the rules allow for a lot of freedom it’s key to see if the fund manager is actually using these options to find value. Investors should pay attention to three things: how much is invested in different market caps how sectors are weighted and what themes the fund is betting on.

The portfolio should show movement and change reflecting the flexibility that makes a Flexi Cap Fund what it is.

Q) What is the total AUM you are managing in the category? What is the name of the fund and when was it launched?

A) Bajaj Finserv Flexi Cap Fund, was launched on 14 August 2023. The fund manages Rs. 8756 crore AUM as on 30th Oct 2026.

The fund invests across Large, Mid and Small Caps companies, with a focus on businesses positioned to benefit from long-term megatrends.

These are structural changes in technology, regulation, the economy and society that can create new growth opportunities for businesses.

Q) What has been the performance of the fund?

A) As on 30 October, the fund has demonstrated strong relative performance across market cycles, outperforming the BSE 500 TRI over the medium to long term.

The Direct Plan–Growth delivered -0.10% over one year, 15.77% CAGR over three years and 14.88% CAGR since inception, while the Regular Plan–Growth generated -1.35%, 14.18% and 13.31%, respectively. In comparison, the BSE 500 TRI returned -7.66% over one year, 9.88% CAGR over three years and 9.19% CAGR since inception.
(Disclaimer: Past performance may or may not be sustained in future)

While returns remain an important measure of performance, we believe they should be viewed alongside the risks undertaken to generate them. Investors should evaluate a fund not only on its ability to outperform over time, but also on the consistency of that outperformance, its resilience during market downturns and its adherence to a disciplined and clearly defined investment framework.

Q) What determines your allocation between Large, Mid and Small Caps stocks? Is the decision driven primarily by valuations, earnings growth, business quality or the stage of the market cycle?

A) These factors work together. We begin by identifying businesses that can benefit from structural megatrends, then evaluate their competitive position, management, financial strength and ability to translate the opportunity into earnings.

Valuation determines whether that growth potential is available at a reasonable price.

Market Cap allocation reflects where we find the best combination of business quality, earnings potential and valuation, while also considering portfolio risk and liquidity.

The market cycle provides context, but a broad view on a segment cannot substitute for evaluating individual companies.

For example, large caps may offer better relative value when smaller companies’ prices already assume very strong growth. Equally, selected Mid and Small Caps businesses may offer opportunities even when their broader indices appear expensive. Flexibility allows us to make those distinctions.

Q) How do you distinguish a genuinely attractive business from a stock that is simply trading at a lower valuation? What are the key parameters you evaluate before investing?

A) A low valuation is a starting point for investigation, not a sufficient reason to invest. The key question is whether the market is underestimating a business’s future earnings potential or correctly recognising a deterioration in its prospects.

Our megatrend approach asks whether a company will benefit from a structural change, whether its business model can monetise that opportunity and whether its management can execute. Being associated with a promising theme is not enough.

The financial assessment should support that business case: the durability of growth, returns on capital, cash generation, balance-sheet strength and reinvestment requirements all matter. We then assess what the current price already assumes.

A seemingly cheap stock can remain a poor investment if earnings keep weakening; a higher valuation can be justified only when the business fundamentals support it.

Q) What signals would prompt you to increase Large Caps exposure and reduce Mid or Small Caps holdings? How quickly can you reposition the portfolio?

A) We would consider increasing large-cap exposure when their prospective returns become more compelling relative to Mid and Small Caps opportunities.

Signals could include a widening valuation gap, stronger earnings visibility in larger businesses, or smaller companies’ valuations moving ahead of what their fundamentals can support.

Deteriorating business performance or rising liquidity and concentration risks would also warrant a review. The decision should follow a change in the investment case or relative opportunity, rather than market-cap labels alone.

The pace of repositioning depends on the size of the change, trading liquidity and market conditions. A portfolio cannot always be shifted immediately without affecting execution prices. The objective is to respond appropriately while managing transaction costs and market impact; a fixed repositioning timeline would be misleading.

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Q) A flexi-cap fund may outperform during one market cycle and lag during another. How should investors distinguish normal underperformance from a problem with the investment process?

A) Investors should ask what caused the underperformance and whether the explanation is consistent with the fund’s stated approach. A portfolio can lag when market leadership shifts towards sectors or businesses it does not own, even if the underlying investment cases remain intact.

The more important questions are whether portfolio companies are delivering broadly as expected, whether risks remain controlled and whether the manager responds when the evidence changes. Repeated investment-thesis failures, unexplained changes in style or increasing risk to recover lost performance deserve closer scrutiny.

Rolling returns and performance across different market conditions are more useful than one isolated ranking. However, the fund’s available history must also be recognised: a relatively young fund cannot yet demonstrate performance across several complete market cycles.

Q) How can investors tell whether adding a flexi-cap fund improves diversification or creates portfolio overlap?

A) Investors should compare the underlying portfolios, including stock weights, sector exposures and allocation across market capitalisations. The number of common stocks alone can be misleading: the same company may be a small holding in one fund and a significant position in another.

It is also useful to examine investment style and exposure to common business drivers. Two funds can hold different stocks yet remain heavily dependent on the same economic theme.

A Flexi Cap fund adds diversification when it brings meaningfully different exposures or a complementary investment approach to the existing portfolio. If its major holdings and risk exposures largely repeat what the investor already owns, adding another fund may provide limited additional diversification. This assessment should be revisited as portfolios change.

Q) How do you decide when to sell a stock? Is it because the valuation has become expensive, the original investment thesis has weakened, or a better opportunity has emerged elsewhere?

A) All three can matter, but they require different judgments. A weakening investment thesis calls for reassessing why we own the business. Changes in technology, regulation, competition or management execution can alter its long-term prospects, even when the broader theme remains promising.

Valuation matters because a strong business can become an unattractive investment if its price discounts too much future growth. However, a price increase alone is not a reason to sell; we need to reassess the remaining opportunity against the risks.

A better opportunity elsewhere or excessive portfolio concentration may also justify reducing a position.

This is the essence of “Buy & Watch”: remain patient while the investment case holds but, remain willing to act when the evidence changes.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)