No foreign equities: Why Bajaj AMC's Nimish Chandan swears by India

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"Bet on what you understand" is the investing philosophy Bajaj Asset Management's chief investment officer, Nimish Chandan, has long followed. So, even as the global AI rally drew investors into a handful of US technology stocks and India delivered subdued returns for nearly two years, he felt no FOMO (fear of missing out).

The veteran fund manager with 23 years of investment experience has zero exposure to international equities. “I have a very strong home bias in terms of investing. I am very bullish on India across asset classes, whether fixed income or equities. I typically want to invest completely in what I understand,” he said.

That home bias isn't a tactical call based on current market conditions but an investing philosophy he has followed for years. “One thing that I have is patience. I don't try to compete with other investors in the short term. I try to see that my long-term goals are achieved. With the asset allocation and strategy that I follow, my long-term goals seem to be well secured.”

Many investors buy international funds to hedge against rupee depreciation. Chandan has chosen a different route. “Some part of my portfolio is in gold. It gives me a hedge against currency depreciation because gold benefits from a weaker rupee. That's the hedge I use.”

Instead of cutting equity exposure during the volatile phase over the last two years, Chandan did exactly the opposite.

“My equity allocation has gone up. I have taken the opportunity of markets being so volatile in the last two years to increase my exposure in equities and mutual funds, particularly in the small-cap category.”

His equity portfolio is almost entirely invested through mutual funds, with 90% in actively managed funds and 10% in passive funds. By market capitalization, 40% is allocated to large-cap funds, while mid- and small-cap funds together account for 60%.

The strategy has paid off. “I am sitting on a CAGR of 17-19% in equities.”

He remains constructive on India's earnings outlook and believes foreign investors will eventually return after spending the past two years chasing AI-led global themes.

“India was considered a non-AI investment. But when AI stocks undergo sharp corrections, India offers strong diversification. We have a broad opportunity set across sectors and themes, liquid and well-regulated markets, strong corporate balance sheets and good returns on capital. I think that money will come back.”

Within India, Chandan isn't making narrow thematic bets either. “Sector-wise, I see meaningful opportunities in financials, materials, industrials, pharmaceuticals and consumer discretionary. The focus remains on identifying quality businesses with strong growth potential, reasonable valuations and the ability to compound earnings over the medium to long term.”

While he remains bullish on India, Chandan expects global equities to witness a larger correction. “When an asset class becomes extremely popular, expectations also become very high. Along with that, valuations become stretched. I'm not referring only to traditional valuation metrics like the price-to-earnings ratio. Investors also assign high valuations based on the assumption that strong growth will continue for many years.”

That assumption, he cautioned, may not always hold.

“Some of these themes could see corrections once investors realize that the growth trajectory may not remain as strong over the long term. It may turn out to be a three- or four-year growth cycle, after which growth moderates or competition intensifies. That's why I believe international equities could witness some correction, and investors should maintain a degree of caution while allocating to them.”

Chandan's fixed-income portfolio is as unconventional as his equity allocation.

He holds no fixed deposits. Nearly 90% of his debt allocation is in bonds, with the remaining 10% in debt mutual funds. His bond port...