Nimesh Chandan, the Chief Investment Officer at Bajaj Asset Management Company, holds the view that Indian equity markets are currently undervalued, particularly in the large-cap segment. He suggests that a rally could emerge should peace prevail in West Asia, alleviating some global uncertainties that have contributed to recent market volatility.
Despite the recent strong performance of small and mid-cap indices, Chandan advocates for a highly selective, bottom-up approach to investment. Rather than broad-based sector buying, the fund house plans to meticulously choose individual companies based on their fundamentals and potential. "Except IT, we see every sector has some opportunity. But after the rally that we have seen in small caps and mid-caps, rather than picking by sector, we are going company by company on a bottom-up basis, which ones are better," Chandan stated.
Identifying Future Winners Through Megatrends
Chandan stresses the importance of observing significant megatrends to identify future growth opportunities. Key trends currently on Bajaj AMC's radar include:
- Digitisation and technology transformation
- Resurgence of Indian manufacturing
- Infrastructure boom
- Sustainability focus
- Health and wellness focus
- Consumerism and urbanisation
The ongoing financialisation of savings is also seen as a beneficial trend, supporting capital marketplaces, banks, and non-bank finance companies.
Sectoral Focus and Strategic Underweights
In terms of portfolio adjustments, Bajaj AMC has strategically added companies in precision engineering, aerospace, and semiconductors. However, the fund house remains underweight on information technology (IT) companies.
Sorbh Gupta, Head of Equities at Bajaj AMC, explained the cautious stance on IT: "Valuations have become attractive, but we are still not able to locate a good earnings upgrade cycle for IT companies. We believe the catalyst is some time away and if you buy now, you may end up in a value trap."
Bajaj AMC's Growth and Future Plans
Bajaj AMC, one of India's newer asset managers, launched its first fund in 2023. As of the April-June quarter, its average assets under management (AUM) exceeded Rs 33,000 crore.
The fund house currently offers a diverse equity portfolio, including a large-cap fund, a flexi-cap fund, a large and mid-cap fund, and a small-cap fund, alongside several sectoral funds. While it does not currently have a dedicated mid-cap fund, there are no immediate plans to launch one.
Looking ahead, Bajaj AMC has applied for a business cycle fund and is actively pursuing a Specialized Investment Fund (SIF). Ganesh Mohan, MD of Bajaj AMC, indicated that the SIF, designed for higher ticket sizes (Rs 10 lakh plus) with clear differentiation from regular mutual funds, is an interesting product they aim to launch in the first half of the next fiscal year. To launch an SIF under Route 1, an asset management company must meet specific SEBI regulations, including operating for at least three years and maintaining an average AUM of at least Rs 10,000 crore over the preceding three years.