In this environment, Nimesh Chandan, Chief Investment Officer, Bajaj Finserv Asset Management Limited believes that while short-term headwinds may weigh on earnings and sentiment, the broader structural story of the Indian economy remains firmly intact.
In an interaction with Kshitij Anand of ETMarkets, Chandan highlights that current market corrections have brought valuations closer to fair levels, creating opportunities for long-term investors willing to look beyond near-term noise.
He identifies Financials, Industrials, and Healthcare as key sectors poised to benefit from India’s ongoing economic and credit cycle upturn, supported by improving earnings visibility and reasonable valuations.
He also advises investors to stay disciplined—either deploying lump sum capital if they can absorb volatility or adopting a staggered approach via SIPs or STPs—while maintaining a minimum three-year investment horizon. Edited Excerpts –
Q) Thanks for taking the time out. We have entered FY27 on a volatile note amid geopolitical concerns, rising oil prices, possibility of rise in interest rates etc. Where do you see markets headed?
A) Unfortunately, we seem to have hit a speed bump in an otherwise strong growth year. Due to the geopolitical concerns and rising oil prices, there is a possibility that there could be some slowdown in economic growth and profit growth in the first half.
A small cut in earnings cannot be ruled out if this crisis continues for a bit longer. If this war in West Asia resolves quickly, as is widely expected right now with the ceasefire, there is a possibility that there is no significant earnings cut for FY27.
Our base remains that Indian economy, business cycle and the credit cycle are on an upturn. We have a positive stance on the earnings growth for FY27 and FY28. We are currently trading below intrinsic value for the Nifty 50 Index.
Q) What should investors do who are planning to put fresh money say Rs 10 lakh in markets? What should be the sectoral allocation?
A) Investors who can handle near-term volatility can put a lumpsum amount right now. Valuations are fair, but because of the geopolitical crisis, there could be near-term volatility. Other investors may stagger their investment through STP (Systematic Transfer Plan) or SIP (Systematic Investment Plan) as a route.
However, they should have at least three-year view when they are investing in the equity markets. From a sectoral perspective, we like Financials, Materials, Industrials, Healthcare and Consumer Discretionary. We believe large private banks as a category are available at good valuations.
We have been positive on pharma, specifically CRAMS (Contract Research & Manufacturing Services) and hospitals. We are equal-weighted on consumer discretionary as we are positive on long term prospects of the sector.
However, we are selective in this sector, evaluating companies on the potential impact of high energy and material prices on them. Within Industrials, we prefer Defence and Power.
Q) FIIs have remained net sellers in Indian equity markets withdrawing Rs 1.6 lakh cr. What will reverse the flows?
A) The India–US trade agreement earlier helped stem the FPI outflows that India had been witnessing over the past year. However, the recent escalation in geopolitical tensions in the Middle East has triggered a renewed phase of outflows.
Given India’s heavy dependence on imported crude oil, rising oil price uncertainties tend to weigh on investor sentiment in the near term.
That said, we view this as a transitory phase. As the geopolitical situation stabilizes and recovery gains traction, India’s relative valuation attractiveness compared to other emerging markets should support a revival in FPI inflows.
The key variables to monitor remain the evolution of the West Asia crisis and a moderation in crude oil prices.
Q) How do you see the currency moving in the next few months?
A) The INR has seen a sharp correction, first due to tariffs, FPI outflows and now crude spike and higher gold prices. We are the world’s largest importers of gold and most of our crude requirements are imported. These exert a lot of pressure on the INR.
If the geopolitical crisis abates and the crude cools off, we believe the pressure on the INR could ease at these levels. Falling INR is also an opportunity. A contrarian view we hold is that, this depreciation of currency will create huge export opportunity for Indian manufacturing sector.
Q) You have seen many market cycles and I am sure this one is no different. Things which one should avoid doing at current juncture?
A) Clearly, investors should avoid getting fearful in these equity markets. We did a very simple analysis at Bajaj Finserv AMC. We observed that the markets correct every time crude prices have crossed $100 per barrel.
The investors who have used that correction to invest have made healthy returns in almost all cases over the next three to five years.
Hence, the only thing the investors should not do right now is panic, be fearful, or be very myopic. This is a good opportunity from an equity investor’s perspective because of the corrections in valuation. Investors should focus on fundamentals, be patient, and stick to their asset allocation plan.
Q) How do you see Gold and Silver moving in FY27?
A) Gold and silver have already witnessed a strong rally, and from here, returns are likely to be more measured rather than sharply bullish. These assets should be viewed primarily as portfolio hedges rather than return-chasing opportunities.
Gold is expected to continue playing its role as a key diversifier, especially amid ongoing global uncertainties.
Silver, on the other hand, may remain relatively more volatile due to its higher linkage to global growth and industrial demand.
At this stage, investors should avoid chasing the rally in precious metals and instead use them strategically within portfolios for diversification rather than for aggressive return expectations.
Q) After the recent correction, do you see Indian markets trading at reasonable valuations vs developed or emerging markets?
A) From 2021 till Sept 2024, Indian markets outperformed other emerging markets by 70-80%. Since then, Indian has underperformed by more than 40%. This has brought valuations closer to fair value at an aggregate level.
Growth is recovering, interest rates are lower and hence in many pockets of the market, valuations are attractive.
From a global perspective, India continues to command a premium over both developed and emerging markets. This premium reflects strong growth visibility and better capital efficiency of corporate India.
Q) Which sectors are likely to hog the limelight in FY27 after the recent fall?
A) In the current environment, investors should avoid crowded trades and instead focus on sectors offering earnings visibility alongside reasonable valuations. Domestic cyclicals such as capital goods, manufacturing, and infrastructure are well-positioned to benefit from India’s ongoing capex cycle.
Financials, including banks and select NBFCs, should continue to see steady support from credit growth and overall economic momentum.
Within consumption, opportunities exist but are selective in nature, with a preference for segments where demand visibility remains strong. Information Technology may hog the limelight but due to worries on the US economy and developments in AI.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
