This fund manager believes equity is undervalued, but bottom-up stock selection may be key to returns

India's equity markets have been through a volatile period, on the back of global uncertainties, whether it was the US import tariff-related worries in 2025 or the war in West Asia this year. However, small and midcap indices have rallied in the last few months.

Nimesh Chandan, the chief investment officer at Bajaj Asset Management Company, feels equity is undervalued, especially large cap, and one could see a rally should we see some sort of peace emerging in West Asia. However, the asset manager will go by a stock selection approach, rather than broad-based buying, more so after the mid and small cap rally.

"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 said.

Chandan stresses the need to observe megatrends, which can help identify future winners.

Digitisation and technology transformation, resurgence of Indian manufacturing, infrastructure boom, sustainability focus, health and wellness focus, and consumerism and urbanisation are just some of the trends the fund house is observing currently.

He also noted financialisation of savings continued, which in turn was benefiting capital marketplaces, banks and non-bank finance companies among others.

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The fund house has also added companies into precision engineering, aerospace and semiconductors, said Chandan.

However, it remains underweight on IT companies.

"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," said Sorbh Gupta, the head of equities at Bajaj AMC.

The fund house is among the newer asset managers to set up in India, with its first fund launched in 2023.

The fund house had average assets under management (AUM) of over Rs 33,000 crore in the April-June quarter, according to AMFI.

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Bajaj AMC's equity portfolio currently includes a large cap fund, a flexi-cap fund, a large and midcap fund, and a small cap fund, apart from a few other funds, including sectoral funds. The fund house, however, doesn't have a midcap fund yet and has no plan to launch one in the immediate future.

The fund house intends to launch a business cycle fund, for which it has applied.

It is also interested in a specialised investment fund (SIF), but that will probably only be in the next financial year.

"We definitely see it as an interesting product that has come in the Rs 10 lakh plus ticket size, with a clear differentiation from the regular mutual fund. This is a product we are definitely looking to launch. We will probably do that in the first half of next fiscal year, " said Bajaj AMC's MD Ganesh Mohan.

Under the Securities and Exchange Board of India Regulations, to launch an SIF under Route 1, an asset management company needs to have been operating for at least three years and have an average AUM of at least Rs 10,000 crore in the preceding three years.