The falling market has created some pockets of comfort in the large-cap space and also among small- and mid-cap stocks, despite them trading above their long-term averages, says Nimesh Chandan, chief investment officer at Bajaj Finserv AMC. He tells Ananya Grover that investors should exercise caution while investing in initial public offerings (IPOs). Excerpts:
Nifty 50 has fallen more than 15% from its September peak, and broader markets have declined even more. How long will the correction last?
When discussing corrections, most people focus on price correction. However, the correction in valuations is more relevant. In the case of the Nifty 50, valuations are now close to its long-term average. While mid-caps and small-caps remain above their historical averages as a category, the recent correction has some pockets of valuation comfort even in these categories. Calling a market bottom is difficult, but it’s evident that valuation comfort has improved, particularly in large-caps.
What macro factors support your view of a rebound?
The GDP growth is poised for a cyclical boost, supported by rising consumption, a strengthening rural economy and increased private sector capex, providing strong macro tailwinds. Additionally, if global tariff-related uncertainties subside, it could further stabilise and support the markets.
Is it a good time to invest or a further fall will provide better entry points?
Investors should consider slowly adding from hereon, particularly in areas where valuation comfort exists, and the growth outlook remains strong. Equity investing often rewards a contrarian approach — opportunities arise when the crowd is fearful. Market corrections can create attractive entry points, allowing long-term investors to capitalise on mis-priced assets.
What positives do you see in the consumption and banking space after the Budget?
The Budget was well-balanced, with tax relief measures being expected to boost consumption. Increased social spending by states and the implementation of the Eighth Pay Commission will further support the consumption growth. RBIs liquidity-easing efforts will help the banking sector. In FY26, we expect a pick-up in deposit as well as credit growth.
What changes with the addition of newer sector stocks in the Nifty 50?
We cannot comment on specific stocks. However, over the years, we have seen a higher addition of structural long-term growth stocks in the Nifty50.
Primary markets are gaining a lot of traction from foreign investors. What’s your outlook?
We have been cautious about primary market issuances since last year, as many IPOs were priced to perfection, offering minimal value for investors. When considering newly-listed companies, investors should exercise caution. Since investors are not aware of the management’s ability to deliver on promises and have limited insight into business cycles, careful selection becomes crucial for sustainable returns.
How do you advise investors to allocate assets if they are entering the market now?
Every investor has a different risk profile and different financial goals. A more general advice will be to begin with a dynamically-managed balanced advantage fund, preferably one with a large-cap equity focus, or consider a multi-asset allocation fund. Those opting for SIPs over lump sum investments may find strategies like flexi-cap or large-cap funds more suitable.
How is the AMC handling market volatility through investment strategy?
We continue to focus on our investment philosophy, ‘INQUBE’ i.e. information edge, quantitative edge as well as the behavioural edge. The behavioural edge has significant potential as it helps us in two aspects: a) identifying where the crowd has over-reacted or under-reacted; and b) reducing our behavioural mistakes and improve investment decisions.