"Bet on what you understand" is the investing philosophy Bajaj Asset Management's chief investment officer, Nimesh Chandan, has long followed. So, even as the global AI rally drew investors into a handful of US technology stocks and India delivered subdued returns for nearly two years, he felt no FOMO (fear of missing out).
The veteran fund manager with 26 years of investment experience has zero exposure to international equities. “I have a very strong home bias in terms of investing. I am very bullish on India across asset classes, whether fixed income or equities. I typically want to invest completely in what I understand,” he said.
That home bias isn't a tactical call based on current market conditions but an investing philosophy he has followed for years. “One thing that I have is patience. I don't try to compete with other investors in the short term. I try to see that my long-term goals are achieved. With the asset allocation and strategy that I follow, my long-term goals seem to be well secured.”
Many investors buy international funds to hedge against rupee depreciation. Chandan has chosen a different route. “Some part of my portfolio is in gold. It gives me a hedge against currency depreciation because gold benefits from a weaker rupee. That's the hedge I use.”
Using volatility to buy more equities
Instead of cutting equity exposure during the volatile phase over the last two years, Chandan did exactly the opposite.
“My equity allocation has gone up. I have taken the opportunity of markets being so volatile in the last two years to increase my exposure in equities and mutual funds, particularly in the small-cap category.”
His equity portfolio is almost entirely invested through mutual funds, with 90% in actively managed funds and 10% in passive funds. By market capitalization, 40% is allocated to large-cap funds, while mid- and small-cap funds together account for 60%.
The strategy has paid off. “I am sitting on a CAGR of 17-19% in equities.”
He remains constructive on India's earnings outlook and believes foreign investors will eventually return after spending the past two years chasing AI-led global themes.
“India was considered a non-AI investment. But when AI stocks undergo sharp corrections, India offers strong diversification. We have a broad opportunity set across sectors and themes, liquid and well-regulated markets, strong corporate balance sheets and good returns on capital. I think that money will come back.”
Within India, Chandan isn't making narrow thematic bets either. “Sector-wise, I see meaningful opportunities in financials, materials, industrials, pharmaceuticals and consumer discretionary. The focus remains on identifying quality businesses with strong growth potential, reasonable valuations and the ability to compound earnings over the medium to long term.”
Cautious on international markets
While he remains bullish on India, Chandan expects global equities to witness a larger correction. “When an asset class becomes extremely popular, expectations also become very high. Along with that, valuations become stretched. I'm not referring only to traditional valuation metrics like the price-to-earnings ratio. Investors also assign high valuations based on the assumption that strong growth will continue for many years.”
That assumption, he cautioned, may not always hold.
“Some of these themes could see corrections once investors realize that the growth trajectory may not remain as strong over the long term. It may turn out to be a three- or four-year growth cycle, after which growth moderates or competition intensifies. That's why I believe international equities could witness some correction, and investors should maintain a degree of caution while allocating to them.”
No fixed deposits, but plenty of tax-free bonds
Chandan's fixed-income portfolio is as unconventional as his equity allocation.
He holds no fixed deposits. Nearly 90% of his debt allocation is in bonds, with the remaining 10% in debt mutual funds. His bond portfolio has generated a 7-8% CAGR. The biggest allocation is to tax-free bonds that he accumulated several years ago when yields ranged between 7% and 8%, and investor interest was limited.
“My weightage of tax-free bonds is very high. I bought them when yields were between 7% and 8%, and there were very few takers. My post-tax return becomes much superior compared to other fixed-income instruments. It is equivalent to earning around 11-11.5% on a taxable bond.”
He said investors often compare only headline yields while choosing fixed-income products. For those in higher tax brackets, however, tax-free bonds can generate significantly better post-tax returns than taxable alternatives.
On the broader bond market, Chandan believes the Reserve Bank of India's recent measures allowing banks to mobilize funds through Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits and External Commercial Borrowings (ECBs) have improved market sentiment.
“These measures are expected to attract foreign currency inflows, which have already led to some price appreciation in bonds. If the expected inflows materialize, the 10-year government bond yield is likely to remain range-bound from current levels. That still offers attractive carry. Within fixed income, AAA-rated corporate bonds can provide an additional yield over government securities, making them a compelling option for investors seeking relatively stable returns.”
Emergency corpus
Unlike many financial planners who advocate maintaining a large emergency fund, Chandan keeps only about 3 to 4 months of expenses in readily available cash.
“Since most of my investments are liquid, I do not feel the need to hold a very large emergency fund. I typically set aside three to four months of expenses for immediate needs. Sometimes, some extra cash remains idle until I find the right opportunity to deploy it.”
Gold is the goalkeeper
Gold occupies an important, though defensive, role in his portfolio.
He hasn't increased his allocation despite the sharp rally over the past two years. Instead, its share in the portfolio has risen naturally because of price appreciation.
“I invested in gold back in 2023 and have maintained a steady allocation since then. I haven't added much. Because gold has appreciated sharply over the last two to three years, its allocation has automatically increased.”
He summed up its role in one sentence: “I consider gold the goalkeeper in my portfolio. If everything goes wrong, gold will save me.”
No PMS, AIFs or real estate
Despite managing one of the country's largest mutual fund houses, Chandan has consciously stayed away from alternative investments. He has no exposure to portfolio management services (PMS), alternative investment funds (AIFs) or specialized investment funds (SIFs). Nor has he allocated money to real estate.
“Alternative investments and real estate can offer diversification, but I have not allocated to them personally yet. At this stage, my focus remains on assets that are easier to track and manage.”
‘Be greedy when others are fearful’
The biggest investing lesson that shaped Chandan's philosophy came early in his career. “Very early in my career, thanks to my mentor, I learnt to be greedy when others are fearful.”
That principle, he said, helped him stay calm during periods of market stress. “It helped me avoid emotional decisions and look for opportunities when sentiment was weak. It reinforced the value of patience, discipline and contrarian thinking.”
His advice to investors today is equally simple. “Post-covid until September 2024, markets moved almost consistently upwards, generating quick short-term returns. In the current market, simply following momentum is less likely to work. Investors need patience, discipline and a sharper focus on fundamentals, cash flows and sustainable earnings growth.”