Bajaj Asset Management CIO Nimish Chandan continues to avoid international equities, favoring a 'home bias' toward Indian assets. He recently increased his exposure to domestic small-cap and mid-cap funds during periods of market volatility. His strategy highlights a focus on long-term fundamentals, gold as a currency hedge, and a cautious outlook on potentially overvalued global AI-driven stocks.
Detailed Coverage
Nimish Chandan, the Chief Investment Officer at Bajaj Asset Management, has publicly reaffirmed his investment strategy of maintaining zero exposure to international markets. Despite the global excitement surrounding Artificial Intelligence (AI) stocks, Chandan maintains a strong conviction in the Indian equity and fixed-income landscape. With over two decades of professional experience, his approach centers on investing in businesses and asset classes that are familiar and easier to monitor.
Portfolio Strategy During Volatility
Chandan has adopted a contrarian stance, choosing to increase his allocation to equities rather than reducing it during the market volatility seen over the last two years. His portfolio is heavily skewed toward mid-cap and small-cap segments, which account for 60% of his total equity holdings, while large-cap funds make up the remaining 40%. The majority of these investments are directed through actively managed mutual funds, which he credits for delivering a compound annual growth rate of 17-19% in his equity portfolio.
Managing Currency and Fixed Income
Rather than using international funds to hedge against a weakening rupee, Chandan utilizes gold as a defensive asset in his portfolio. He views gold as a goalkeeper for his overall wealth, noting that its role has become more prominent due to natural price appreciation. In his fixed-income strategy, he avoids traditional bank fixed deposits entirely. Instead, he maintains about 90% of his debt portfolio in bonds, including tax-free bonds that have provided him with an effective post-tax yield of 11-11.5%. He believes that actions taken by the Reserve Bank of India, such as managing FCNR(B) deposits and external commercial borrowings, help keep government bond yields stable, making them an attractive option for income-focused investors.
Outlook on Indian Earnings and Risks
Chandan remains positive about India’s earnings prospects, citing strong corporate balance sheets and efficient returns on capital as key drivers for long-term growth. He identifies financials, materials, industrials, pharmaceuticals, and consumer discretionary sectors as primary areas of interest. Conversely, he cautions that global equity markets, particularly those driven by AI, may face corrections due to high valuations and stretched expectations. He expects that foreign investors may eventually rotate their focus back toward the Indian market as they look for more diversified investment opportunities beyond dominant global themes. The key monitorable for investors following this approach will be the sustainability of earnings growth in the domestic market and how global interest rate trends impact the performance of large-cap versus mid-cap and small-cap stocks.