Mr. Sanjay Chawla

Chief Investment Officer - Equity, Baroda BNP Paribas Mutual Fund.

Mr. Chawla has over 35 years of experience in fund management, equity research and Management Consultancy. Currently, he is Chief Investment Officer - Equity at Baroda BNP Paribas Asset Management India Private Limited. In his prior roles, he has worked with Baroda Asset Management India Limited as Chief Investment officer, Birla SunLife AMC as Sr. Fund Manager-Equity, managing various schemes with different strategies. Mr. Chawla has also worked as Head of Research with SBI Capital Markets and in various capacities in the equity research space in Motilal Oswal Securities, IDBI Capital Markets, SMIFS Securities, IIT Invest Trust & Lloyds Securities. He is the fund manager for certain schemes of the Mutual Fund. Mr. Chawla is graduated with a Master of Management Studies from Birla Institute of Technology & Science (BITS), Pilani.

Please note we have published the answers as it is received from the Fund Manager of Baroda BNP Paribas Mutual Fund.

Q1. Following the recent government commentary around fuel conservation, gold imports, and external vulnerabilities, do you believe long-term investors should be concerned about the broader macroeconomic impact, or are these measures largely preventive steps reflecting prudent economic management?

Ans: In our view, the recent government commentary around fuel conservation, gold imports etc is more of a groundwork towards the possibility of an extended resolution to the West Asia conflict. As the conflict lingers and the disruptions in the Straits of Hormuz continues, crude/gas/petrochemical prices remain elevated. This is likely to place a downward pressure on GDP growth, an upward bias on inflation and a worsening current account deficit (CAD) placing pressure on the currency. It makes the situation for maintaining fuel prices less and less tenable. For long term investors, the currency and bond markets (OIS markets are tentatively pricing in 50bps rate increases by the close of FY27) have already recalibrated to a large degree. Equity has seen a small bounce from the lows of March when peace talks began and market may give up those rebound gains in case a truce is delayed. However, our health as an economy as we entered into this conflict is vastly different from say the global financial crisis years or the tech meltdown years. Valuations euphoria had already drained through CY2025 and our valuations have now reverted to mildly below long term levels. FII ownership is also at a multi-year low indicating no extended ownership. Retail leverage/margin financing etc have also been manageable. Yes, growth may be vulnerable and one could see 300-500bps of earnings cuts, but it would not be meaningfully large as an extension to impact on markets. This crisis may actually be a reasonable window for long term investors to get into markets. A resolution of the conflict would naturally translate to cool off in energy markets in 1-2 quarters, changing not only sentiments but also reducing the CAD and relieving the risks to growth and inflation.

Q2. Beyond financial metrics, how do you assess the qualitative aspects of a company while filtering stocks for long-term portfolios? What are the early signs that help you differentiate sustainable compounders from businesses benefiting only from short-term cycles?

Ans: We look at a triangulation of BMV - business, management and valuation to identify long term winners. A company’s ability to weather shocks and sustain its growth can stem from multiple sources - a technology proficiency, large scale driving competitiveness, ability to leverage on raw materials (e.g. access to high grade alumina for an aluminium producer) or labour costs (certain labour-intensive jobs may be more competitive out of India) etc. The other part M - management is where we desire consistency between statements and action, proper timely execution of articulated strategy with a high level of governance and lastly the V - valuation i.e. there has to be a relation between price (we pay) and the value (we get).

Q3. Smart beta strategies are gaining ground as investors seek a middle path between passive and active investing. How do you view the growth of smart beta in India, and can factor-based strategies consistently add value across market cycles compared to traditional active and passive approaches?

Ans: These are interesting alternatives to broaden the choices available to investors. Some of these categories are quite nascent so one could see some build-up of assets in the near future. However, they have their own pros and cons. On the positive side, they may be a little cheaper and also they do eliminate some human biases. On the negative side, typical strategies like momentum or quality etc. do not work across all time frames and it may be more appropriate for an astute investor to keep shuffling across such styles. A less involved investor may prefer a professional to take the calls through active management. Long term investors may also find it cumbersome to constantly shuffle styles and suffer tax leakages if their intent is to reap benefits of long-term investing.

Q4. With the launch of multiple strategies in the newly introduced SIF space, how should investors understand the role of these products within their portfolios? What type of investors are best suited for SIF strategies, and how different are they from traditional mutual fund offerings?

Ans: The SIFs are a new category of mutual fund strategies that are available to investors within the broader MF platform. The investment strategies of the funds utilize the same asset classes and securities as traditional mutual funds - Equity, Fixed Income, Commodities, InVITs, etc. The key differentiator being the manner in which these varied asset classes and instruments ( including derivatives) are used to run the investment strategy for these funds. Investors should evaluate their risk appetite, map out their investment and financial needs and then consider investment choices that would help them achieve these needs. The SIFs tend to run relatively more complex strategies than mutual fund schemes, and for many of the strategies, may have higher risk portfolios. Therefore, investors would be well guided to choose funds based on their risk appetite and evaluate individual SIF strategies for their suitability in their portfolio.

Q5. Many investors struggle with asset allocation discipline during bull and bear cycles. How should investors decide when to rebalance equity exposure rather than reacting emotionally to market movements? What indicators or life-stage factors should ideally drive such decisions?

Ans: Investors should stick to their asset allocations that have been created based on their risk appetite, time horizon and investment needs. Bull and Bear cycles are a normal part of the capital markets and difficult to predict and therefore even more difficult to time investments in accordance with these cycles. We believe investors should review their portfolios on a regular basis and re-balance only if required, based on their needs and risk appetites. It is difficult, but investors should actively try to ignore relatively short-term market movements and stay disciplined and focused on their needs.

Q6. While digital platforms have made investing more accessible, data indicates that investors working with MFDs tend to stay invested longer through market cycles. Do you believe the role of distributors is evolving from product distribution toward behavioural coaching and financial discipline?

Ans: Mutual Fund Distributors are an integral part of the Mutual Fund ecosystem. Financial decisions for most of the populace are a daunting and esoteric activity and therefore most investors require handholding for both the actual investment decisions as well as guidance through the process of executing those investment decisions. As the market grows, evolves and matures, we see distributors playing more active roles in their investors’ investment life cycles. The resilience of SIPs and Mutual Fund flows despite market volatility has clearly shown that the increasing education and emphasis on disciplined investing, staying the course through market cycles and aligning asset allocation to risk appetites is beginning to make an impact on the broader investing population. MFDs have been instrumental in this growth and understanding of investments.

Source: Internal Research
Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

Mr. Puneet Pal

Head - Fixed Income, PGIM Mutual Fund.

Puneet Pal is the Head-Fixed Income of PGIM India Asset Management Pvt. Ltd. He has over 23+ years of experience in the debt markets within the mutual fund space.

In his last assignment, Puneet was Head - Fixed Income at BNP Paribas Asset Management India Pvt. Ltd. Prior to that Puneet was Sr. Vice President & Fund Manager at UTI Asset Management Company Ltd. He has also worked as Fund Manager at Tata Asset Management Ltd. He is a MBA (Finance) from Symbiosis Institute of Business Management, Pune.

He jointly manages PGIM India Money Market Fund, PGIM India CRISIL IBX Gilt Index – Apr 2028 Fund, PGIM India Ultra Short Duration Fund, PGIM India Liquid Fund, PGIM India Low Duration Fund, PGIM India Corporate Bond Fund, PGIM India Dynamic Bond Fund and PGIM India Gilt Fund and debt portion of certain equity funds.

Please note we have published the answers as it is received from the Fund Manager of PGIM Mutual Fund.

Q1. With crude oil prices remaining volatile and the RBI maintaining a cautious stance on rates, how do you see the interest rate trajectory evolving in India? What is your broad positioning on duration and the yield curve in this environment?

Ans: The duration and the extent of the Middle East conflict will be a key determinant of the Inflation and the growth outlook for FY27. Though the Inflation outlook has worsened markedly, we do not expect a rate hike by the MPC in next week’s policy meeting as the current lower Inflation buys some time for the MPC to wait and gauge the impact of the rapidly evolving situation. We expect RBI to sound hawkish with a decent probability of a change in the monetary policy stance, signalling the end of the rate cutting cycle.

Q2. In this uncertain rate environment, how do you decide the balance between accrual and duration strategies within your portfolio? What key triggers or indicators lead you to shift between the two?

Ans: The choice of accrual and duration strategies depend upon various variables , primarily our outlook on the markets and the relative valuations. Our view of the interest rate trajectory is the key trigger for choosing between accrual and duration strategies.

Q3. Debt is often under-appreciated in portfolio construction despite its role in managing risk and providing stability. How should investors determine the appropriate allocation to debt over the long term, and what frameworks or factors should guide this decision?

Ans: Diversification is essential to mitigate risk. An equity-heavy portfolio will suffer a huge drawdown when markets correct. On the other hand, a portfolio having an optimal balance between equity and debt could protect the downside better. As part of the asset allocation process, investors should invest across different asset classes to cut down risk and achieve an optimal balance between risk and reward.

Q4. Liquid funds offer relatively attractive risk-adjusted returns, yet retail participation remains limited. What are the key factors-such as awareness, liquidity perception, or behavioural biases-that are restricting broader adoption, and what could drive a structural shift in investor allocation?

Ans: Lack of awareness , we believe , is the major factor for lower retail participation in Liquid fund and money market categories. More information and educating investors about asset allocation and financial literacy can drive a shift in investor allocation

Q5. Online bond platforms are increasingly attracting retail investors by offering higher-yield opportunities. How do you assess the risk-return trade-off in such instruments, and what key factors should investors evaluate before investing?

Ans: The risk return is adversely skewed for investors investing on such platforms as an individual investor may not be in a position to handle a negative credit event. We believe that investors are better off investing through institutional investment vehicles such as credit funds offered by mutual funds.

If investors want to invest in bonds through online bond platforms , then they should do proper credit evaluation and due diligence in respect of the bonds they are investing in and should also be aware of the operating mechanics of the high yield bond markets.

Q6. External credit ratings may not always capture early signs of stress. What additional internal checks or early warning indicators does your team use when assessing creditworthiness, and how do these help in protecting investor capital?

Ans: Credit Research is an important part of our investment process. We start with a bottom-up process to create an investible universe. Potential opportunities are first subjected to screening to establish a baseline on financials and corporate governance standards. The filtered issuers are then subjected to more rigorous evaluation standards covering both quantitative and qualitative factors. The process includes an internal credit rating and scoring framework as an input for decision making to complement the external rating. Each issue is subject to ongoing review as long as they are part of the investable universe.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Mr. Vinay Paharia

Chief Investment Officer - Equity, PGIM Mutual Fund.

Vinay Paharia joined PGIM India AMC in January 2023 and is currently the Chief Investment Officer at PGIM India Mutual Fund. He has over 22 years of experience in equity market and fund management. He holds M.M.S, BCom and CFA (ICFAI) degrees. Vinay has been a growth investor and has followed a consistent investment philosophy of buying good quality and high growth companies at a reasonable price. This strategy has been an evergreen framework and has outperformed markets most of the times (but not all the time).  His objective is to buy companies that are available at a price that may be slightly lower than the underlying fair value, which presents a greater potential upside over a five-year period. Vinay vouches for a disciplined, evidence-based investment approach over chasing short-term returns.

Please note we have published the answers as it is received from the Fund Manager of PGIM Mutual Fund.

Q1. With India’s valuation premium over other emerging markets moderating and GDP growth expected to remain strong (~6.8% in FY27), how do you assess the current risk-reward for long-term equity investors? Within this backdrop, which segments-large caps, mid caps, or small caps-appear relatively better positioned today from a valuation and earnings growth perspective?

Ans: Last few months have been a macro stress test - combining oil shock, capital outflows, currency pressures, AI related growth pangs and growth downgrades in a short span. However, we believe, many of these being transitory and would resolve itself with passage of time, timelines however are uncertain. More importantly, the above has resulted in a meaningful correction in the markets and much of the froth in valuations which was built has been taken away which is being reflected in the price. Largecaps and Smallcaps are now trading very close to their longer term averages in terms of valuation and risk-reward is much more balanced than before. However, Midcaps are still trading at moderately rich valuations and are hence less preferred compared to large caps and small caps. We believe, it is a good time to increase allocation to Indian equities. It is important to remember that timing is very difficult and investing when risk-reward is favorable is likely to be more fruitful. More importantly, the risk-reward is highly favorable for high growth and good quality business, wherein valuation as well as earnings growth both are in favor for long term investing.

Q2. With passive AUM continuing to rise in India, where do you believe active management can still consistently generate alpha? Are there specific market segments or conditions-such as higher dispersion or volatility-where active strategies have a clear edge over passive?

Ans: Active management's fundamental premise remains robust: markets are not completely efficient, and skilled managers can exploit these inefficiencies to generate risk-adjusted returns above benchmark indices. The strengths of active investing include:

1. Alpha Generation Potential: Skilled active managers can capitalize on market inefficiencies, behavioural biases, and information asymmetries that passive strategies cannot exploit. During periods of significant market stress or structural changes, active managers can potentially protect capital and identify opportunities thereby generating alpha.

2. Risk Management Flexibility: Active managers possess the ability to adjust portfolio risk dynamically, reducing exposure during periods of heightened volatility or when valuations appear stretched. This tactical flexibility can be particularly valuable during market transitions that indices cannot anticipate.

3. Access to Unique Opportunities: Active strategies can invest in securities or sectors before they enter major indices, potentially capturing returns during the inclusion process. They can also avoid or underweight deteriorating companies that indices must hold until they are removed.

We expect polarized performance from the markets. We expect high growth and high quality buckets to outperform while the low growth/quality bucket to underperform and give away the excesses which were built in FY24. Passive investing means there is some degree of exposure to low growth and low quality stocks as they make up a significant portion of Indexes. Active investing ensures conviction and exposure largely to high growth and high quality stocks.

Q3. As we approach the upcoming earnings season, what is your outlook on corporate earnings growth? Which sectors or themes are likely to drive the next phase of market performance, and where do you see the key downside risks?

Ans: We think we are once again likely to witness an earnings impact like that in the pandemic period. In March 2020 to June 2020 quarter (the first quarter of pandemic), we witnessed massive cuts in Nifty 50 Index 1-year forward earnings expectation, from a growth in double digits (in line with historical performance) to an almost 15% decline. However, once again, this is only likely to be transient (like the pandemic) and not structural. Hence we do not expect a material long term structural impact on the macroeconomic environment. The actual earnings compounded at 15% per annum from March 2020 to March 2026, highlighting the transient impact of the pandemic. We feel the longer term earnings trajectory is unlikely to be impacted even this time, with only a short term transient impact likely due to the current geo political environment. Even a massive cut in short-term earnings can only have a small impact on overall Fair Values of companies. This is because equities are growing annuities valued till perpetuity.

Overall fabric of the market constructive for growth + quality investing for the long term. Preferred sector plays are more domestic oriented – Consumption, Domestic financials, India Healthcare, Telecom. Cautious/Negative on I.T, deep cyclicals, Energy and Utilities

Q4. SIP inflows have remained resilient, touching record highs even during volatile phases. Do you see this as a structural shift in investor behaviour? During market corrections, would you advise investors to maintain, increase, or rebalance SIP allocations-and what factors should guide that decision?

Ans: Investment decisions are shaped not only by returns or market data, but also by individual behaviour. Risk tolerance, time horizon, and emotional responses play a significant role in how investors act, especially during volatile markets. We advise investors to maintain staggered investments for all segments of the market.

Periods of geopolitical uncertainty, such as the conflict unfolding today, often lead to higher market volatility and heightened investor reactions. It is common for investors to consider redeeming investments prematurely, trying to time the market, or pausing allocation decisions altogether. While these responses are natural, history shows that emotionally driven decisions

often work against long-term financial goals. Our internal study of Nifty 500 TRI shows that investors who stayed invested 04-Sep-2001 to 31-Dec-2025) during this period, earned 17.33% return while investors who missed the best 20 days ended up earning just 11.06%. This means that investor who stayed invested, (assuming a lumpsum investment of 1 lakh), made Rs 48.77 lakh at the end of 24.32 years. The investor who missed 20 days accumulated Rs 12.82 lakh, a difference of (Rs-35.95 lakh).

Q5. Many investors chase recent outperformers, especially in mid- and small-cap funds, often misaligning with their true risk appetite. What framework would you recommend for selecting equity funds and ensuring portfolios remain aligned with risk tolerance? How can investors stay disciplined through market cycles?

Ans: We have been strong proponents of Growth Investing in India. Our definition of Growth Investing is as follows:

"Investing in a well-diversified portfolio of companies that demonstrate above average growth in business, while generating above average return on equity, purchased at a reasonable price"

Growth investing is all about buying good businesses at fair price. Returns for growth investors are largely driven by earnings growth. Growth investors do not bet on valuation re-rating, but on fair value growth. India is one of the fastest growing large economies in the world. Thus, we have a higher probability of finding superior growth companies in India. We have a large number of companies generating higher than their cost of equity, thereby creating superior shareholder value. We have also witnessed IPOs of a large number of good quality and high growth new age businesses in Indian bourses. Indian companies on average have generated a healthy return on equity (RoE) while growing at a reasonable pace. Over the Long term (two decade) average RoE generated by Top 500 companies in India is 15%. Similarly, long term average sales growth has been 12% for the same set.

We tend to be overweight on the Consumer Discretionary and Healthcare Sectors, as the stocks within these sectors align with our investment philosophy.

Q6. What are the non-negotiable factors your team looks for when selecting stocks? Specifically, how do you evaluate management quality and governance to ensure businesses can sustain performance across cycles?

Ans: Our framework excludes low-growth and low-quality stocks, and it is applicable on all sectors.

Our evaluation of management quality is in conjunction with the quantitative measures stated above and promoter background checks, as well as internal risk triggers. We also take a holistic view from the Fixed Income Team on rating wherever applicable and relevant

Source: Internal Research

Mutual fund investments are subject to market risks, read all scheme-related documents carefully.