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.