A few years ago, on a boat ride in Hong Kong, Nimesh Chandan, CIO of Bajaj Finserv AMC, was battling motion sickness. A friend told him: focus on the horizon. Fix your eyes on something steady in the distance, and the discomfort eases.
That advice now shapes his approach to investing.
In markets rattled by geopolitical shocks, oil swings and overnight tweets, Chandan believes investors need the same steady gaze. In a conversation with Mint, he explains the cycles driving Indian equities, the “mega trends” he is backing, why he believes the Nifty could head to 27,000, and why staggering investments remains the most powerful tool in volatile times.
Edited excerpts:
In a market driven by volatility and global headlines, how have you adjusted your portfolios?
There is an old adage that markets create headlines; headlines don't create markets. But for the last year and a half, headlines, especially overnight tweets from the US have moved markets significantly. Nifty is down less than 10% from its top, but the range-bound volatility has created a lot of anxiety.
During this time, we have focused on sticking to our investment philosophy and focusing on ‘mega trends’ rather than short-term news. For our Flexi Cap fund, for example, we focus on companies that benefit from long-term structural changes.
We assess every news item that comes our way, but we don't necessarily react to it. Only when we see longer-term implications do we change our stance. We’ve taken volatility as an opportunity. Sticking to a rational approach is easier said than done because of the fear and anxiety noise creates, but trusting the unfolding long-term trends has helped our funds steer through this.
What are the cycles you watch out for and how do you see the Indian market positioned across different cycles?
We look at markets through four different cycles: the economic cycle, the business or profit cycle, the credit cycle, and the sentiment cycle. Economy-wise, we are still the fastest-growing country among our peers. Profit-wise, we are seeing an acceleration of profits projected from FY25 through FY27.
Credit growth has also picked up; last year it was languishing at 9–10%, but it is now close to 16%. The only thing that hasn't turned comfortably yet is the sentiment cycle. People are focused on narrow news rather than broad impacts.
Once sentiment turns, we expect to see the Indian markets show their true strength. Our fair value for the Nifty, based on a combination of ratios, comes to approximately 27,000.
Beyond headlines, what are the real risks investors should watch?
One important risk for India is inflation. Oil prices definitely impact this, though so far, the costs haven't been fully passed on to retail consumers. Interestingly, crude oil markets are in "backwardation,” meaning future prices are lower than spot prices, which tells us the market expects this oil crisis to be over soon.
The second factor to watch is El Niño. Forecasts suggest an effect in August and September, which could lead to below-average rainfall. In the third quarter, it will be critical to monitor food inflation. Aside from these two factors, I don't see major problems in the corporate sector.
In fact, we are starting to see the positive impact of government tax cuts, GST revisions, and the "gold effect" on household balance sheets, which has improved the capability of Indians to borrow and spend.
Which sectors are you backing — and where do you see value?
We are bullish on cyclical sectors like materials, industrials, and financials. Within materials, we like metals and cement. In industries, we are focused on power, auto ancillaries, and defence. We were among the first to pick up on power as a mega trend driven by AI needs.
In financials, private banks are at very good valuations with credit growth picking up. We are also positive on healthcare, specifically US generics, CDMO (Contract Drug Development and Manufacturing), and hospitals.
Additionally, we like smaller sectors like telecom and textiles, while we remain underweight on IT. I also have a positive view of rupee depreciation; it makes us competitive, and with the new trade deals with Europe, I expect very good growth in exports next year.
You’ve been bullish on commodities like gold. How much should investors allocate?
It is better for commodity allocations to come through diversified funds, multi-cap funds, or business cycle funds rather than pure commodity funds, which require difficult timing. We are bullish on metals because technology changes like electrification, are dependent on hard assets like copper and aluminium.
We are also seeing a shift from "just-in-time" to "just-in-case" inventory management. Countries want to stock up on copper, aluminium, and rare earth materials to avoid supply chain issues. Domestically, cement is seeing double-digit volume growth due to real estate and infrastructure development. Generally, when the economic cycle picks up, commodities pick up.
What is your message to investors navigating volatile markets?
Several biases impact us during these times. There is "recency bias," where people believe that because markets have been down, they will stay down. Then there is "myopic loss aversion," where people fear that if they buy a stock at ₹80, it might go to ₹70 next week, so they don't buy at all, even if the value is attractive.
My advice is to rely on your process. Stagger your investments through SIPs because it is emotionally easier than trying to catch the exact bottom. Follow business movements, not market movements. Businesses don't change as rapidly as stock prices.
Remember the boat story; if you are disturbed by volatility, focus on the horizon. As long as you are focused on your long-term financial goals, these volatilities will look like opportunities rather than problems. The Indian market has created huge wealth over the last 40 years; the only entry price it asks for is patience.