Mr. Taher Badshah

Chief Investment Officer - Equity Invesco Mutual Fund

Taher has over 30 years of experience in the Indian equity markets. In his role as Chief Investment Officer, Taher is responsible for the equity and fixed income investment function at the firm. He has been with Invesco Asset Management, India for over 7 years. In his previous role with Motilal Oswal Asset Management as Head of Equities, he was responsible for leading the equity investment team. In the past, he has also worked with companies like Kotak Mahindra Investment Advisors, ICICI Prudential Asset Management, Alliance Capital Asset Management, etc. Taher holds a Master’s in management studies (MMS), with specialization in finance from S.P. Jain Institute of Management and a B.E. degree in Electronics from the University of Mumbai.

Q1. The year 2025 is presenting significant challenges, particularly for retail investors holding small-cap stocks. With the correction in high PE stocks, do you anticipate further market downturn or a gradual recovery as we step into FY26?

Ans: We believe the correction in the broad market and particularly in the SMID space since the start of the year has by and large run its course. Bulk of the damage is behind us. Domestic slowdown and Global uncertainty have been the key causes of the market decline. We think many of the measures taken by RBI and the Govt in the past 3 months, the start of the rate cut cycle and the support to consumption through the Budget will have their effects in the coming months to Improve growth trends. Globally, we reckon the tariff measures by the US will be in place over the next 2-3 months. We also expect the US economy to slow this year and thereby foreign investor flows to start moving from developed to emerging markets. Meanwhile, India's valuations, especially in the smallcap segment have corrected 20pc during this fall making the segment quite attractive once again for investors with a 2-3 year horizon.

Q2. Many stocks are currently trading at a 20-50% discount from their previous highs. What key criteria should investors consider when selecting stocks in this environment?

Ans: At a stock level, investors should move up the quality curve but at the same time ensure those companies are able to grow ahead of the system rate of growth (nominal GDP). Companies with credible competitive advantages and strong execution in the recent past should be preferred.

Q3. With factors like Trump's policies, trade wars, tariffs, dollar fluctuations, and a shaky US equity market-alongside Nifty hitting an eight-month low-how should Indian investors adjust their mindset and investment strategy in response?

Ans: Over time various factors will confront markets and investors in their journey. It is important to keep a longer-term view and return expectations modest. One will not find answers to all issues at the same time. It is important to be able to judge what market has already priced in. Due to prevailing uncertainties, India's valuations have lost much of their premium to world markets which provides an attractive entry point for smart investors who look to compound earnings over the long term in our view. Uncertainty provides opportunity.

Q4. If an investor approaches you with a medium risk appetite, and a significant cash reserve looking to invest exclusively in mutual funds, how would you construct a suitable mutual fund portfolio in this current market?

Ans: For investors with a medium risk appetite, I would recommend a combination of a flexicap and small cap fund (75%) at this stage of the market cycle. I would also look to do the remaining 25pc allocation to at best 1-2 thematic funds and a multi asset fund.

Q5. Do you anticipate an earnings recovery in Calendar Year 2025?

Ans: We think India's earnings downgrade cycle is largely done and with the measures undertaken by the central bank and the government, we expect the earnings cycle to strengthen in the coming quarters and alongside a steady back ended recovery in the markets starting second half of calendar 2025.

Mr. Sailesh Raj Bhan

CIO - Equity Investment, Nippon India Mutual Fund

Sailesh Raj Bhan is CIO - Equity Investments at Nippon India Mutual Fund. He has over 27 years of experience in Indian Equity Markets with over 19years at Nippon Life India Asset Management Limited. An MBA in Finance and CFA by qualification, he has been managing multiple flagship funds namely, Nippon India Large Cap Fund, Nippon India Multi Cap Fund & Nippon India Pharma Fund for over 15 years.

Q1. What are your thoughts on the overall budget and its impact on the equity markets, the economy, and other key areas?

Fiscally prudent balanced budget with its 3-pronged strategy 1) supporting consumption through tax cuts 2) maintaining capex thrust & creating better environment for bigger role private sector and 3) fiscal prudence. More disposable income is likely to lead to higher spending, better consumer - business confidence and eventually private capex recovery backed by credit growth revival. We expect the budget will be viewed positively by markets and domestic flows will be supportive.

Q2. When discussing the Budget, it's clear that several incentives have been introduced for the middle class to drive consumption. However, the capital market's expectations were not fully addressed. What are your thoughts on this?

Consumption slowdown was a key area which was sought to be addressed by the budget, however the Capex push was maintained despite the constraints of fiscal prudence. Total capex spend is projected to grow at 10% YoY against 8% in FY25. Including extra budgetary resources (IEBR), total capex spend is likely to grow 11% against 7% in FY25. Within total capex, the growth in roads and railways capex (including IEBR) is flat (0%) in FY26 ( 5-7% YoY in FY25 while defense capex is projected to grow 13% YoY in FY26 versus 4% in FY25. Apart from these measures ease of doing businesses has been the key theme of the Budget, which can help in improving Private Sector capex.

Q3. Have there been any changes in FIIs' concerns or their positioning following the Budget?

The prevailing global macroeconomic conditions along domestic factors may weigh on the sentiment of foreign investors in the short run. This along with the currency volatility based on policy shifts in the US is another parameter which will influence the flows. While the India equity valuations have moderated with large caps closer to long term averages and broader premiums have come off from the highs, it is anticipated the FIIs may remain cautious in the near term till better visibility emerges from a macro perspective.

Q4. What are the most and least promising sectors after the Budget?

Large financials, consumer discretionary segment along with structural themes like urbanization, premiumization and localization of manufacturing appear well placed in the current context

Q5. Given the recent market volatility, what are your predictions for future SIP trends? Have you observed any recent changes in SIP inflows or a shift in allocation patterns?

SIPs are great form of long-term wealth building. Given the extent of investor awareness through various educational initiatives, it is unlikely that SIP flows may witness large scale stoppages. Although, there have not been any significant changes in allocation pattern, it is likely that large cap and large cap-oriented categories like Flexi/Multi/Large Mid Cap etc. may witness higher investor preference on higher than usual volatility.

Q6. Suppose someone with a three-year investment horizon, particularly Gen Z investors who entered the market post-COVID, is now facing a 20-30% drawdown in their mutual fund. They might be questioning their decision, thinking, "What should we do?" How should they navigate this situation?

Asset allocation in line with an investor’s need is very important and in case there is deviation in the same due to market swings, its essential that the same is rebalanced in line with financial needs. Accordingly portfolio can be realigned and investors with shorter time horizon and less risk appetite can consider hybrid strategies like Balanced Advantage or Multi asset allocation funds or even consider adding some debt allocations.

Alternatively if the investor can extend the investment horizon and has appropriate risk appetite they can continue with their investments. Historically it has been observed that sharp decline in equity markets offer great opportunity to accumulate more units (at lower prices) like 2000, 2008, 2013, 2020 wherein the returns post the correction phase can be meaningful.

Mr. Amit Tripathi

CIO - Fixed Income, Nippon India Mutual Fund

Amit has 27 years of experience in Capital Markets. He has been with NIMF for more than 20 years. He has successfully managed fixed income and hybrid funds for the past two decades. Many of these funds have been recognized for superior performance both nationally and internationally. In his current role as CIO- Fixed Income, he leads a team of 22 highly motivated and experienced fixed income professionals.

Q1. Following the policy announcement, why did the bond markets initially react with disappointment, despite yields rising a few basis points?

Bonds markets reacted with disappointment post first rate cut as the move was already priced in by the market. Absence of any specific announcement with respect to liquidity measures even as the RBI guided to ensure sufficient system liquidity coupled with absence of change in stance led to spike in bond yields.

Q2. With two major events-the Union Budget and the highly anticipated rate cut-now behind us, what are your expectations for yields?

Given the good performance of long-term bond yields over the last 12-18 months risk-return trade off appears in favour of short end of the curve i.e 1-5 year. Liquidity easing measures by the RBI may lead to steepening of the yield curve, leading to lower yields at short end of the curve across assets. While a conduct of OMO purchase by the RBI is positive for 10-year benchmark GOI bond. Any incremental deterioration in growth and further rate cuts by the RBI and fall in US bond yields may be positive for long duration.

Q3. How are your debt funds positioned in terms of duration? Have the recent policy updates led to any adjustments?

We have made no changes in the duration and are on the higher side of the duration in the intermediate duration fund category to benefit from the potential rate cuts and liquidity easing measures.

Q4. What according to you were the key takeaways from the governor's speech?

• Given the current growth-inflation dynamics, the MPC felt that a less restrictive monetary policy is more appropriate at the current juncture.

• MPC to use the flexibility embedded in the inflation targeting framework while responding to the evolving growth-inflation dynamics.

• To proactively take appropriate measures to ensure orderly liquidity conditions.

Q5. What advice would you give investors on positioning their fixed-income portfolios considering the budget announcements and the RBI rate cut?

Given a marginal term spread, between 5 and 10-year GOI bonds at around 4 bps, with the 5 year GOI bond currently hovering around 6.65% and the 10-year GOI bond at around 6.69% we expect term spread to widen. Further, the yield of the AAA rated 3- and 5-year corporate bonds currently stands at around 7.30% and 7.26%, respectively, as compared to the 6.63% and 6.65% yield of the GOI bonds of the same tenure. Thus, offering an opportunity of spread compression of corporate bonds over GOI bonds. Further liquidity infusion may soften the yields at short end of the curve.

Accordingly in line with the current market dynamics around 70%-75% of the allocation may be considered at intermediate duration (which invests in 3-5 yr corporate bonds and 5-10 yr g-secs), such as short term funds, corporate bond fund, low duration fund, Banking & PSU debt Fund. and remaining 25%-30% at the long end of the curve.