In an interaction with Nimesh Chandan, CIO of Bajaj Finserv Asset Management

Launching the new Balanced Advantage Fund, Nimesh Chandan, CIO, Bajaj Finserv Asset Management urges investors to participate in the wealth creation journey over the long term by investing in their uniquely designed mutual fund scheme.

The recent fall in 10-year US Treasury yields from a 16-year high impacted equity markets. To what extent can we expect the Indian equity and debt markets to respond to this development and how sustainable is this fall?

Typically, in the rising bond yield scenario, investments in equities tend to become less attractive as the opportunity cost of investing in equities goes up and vice versa.

The fall in US bond yield aligns with the current stance of the US Fed, indicating a lower probability of rate hikes in the future. The sustainability of the US bond yield’s impact on the Indian equity and debt market will largely depend on US indicators like inflation and unemployment. If inflation softens, the Fed may pause the rate hike. This in turn may soften the US bond yields. In such a scenario, the institutional allocation may see a rise in risk appetite. This will likely have a positive impact on Indian equities as we may see FII flows resuming.

What impact will the Israel-Hamas conflict and its influence on the price fluctuations of crude oil and gold have on the mutual funds market?

In the current situation, we believe the crude oil may be operating in a range with an up-trending price bias. The geopolitical uncertainties may create event-led risks which may cause unforeseen supply distress. Investors typically tend to resort to gold for investments when they see uncertainties or may feel the need to use it as an option to hedge their investments against inflation. Against such a backdrop, investors may seek safer options like gold.

What is your take on the ongoing earnings season and which factors do you think have contributed to the performance of Indian companies during this period?

The corporates have reported mixed H1FY24 earnings. While capex-driven businesses have done well, the export-oriented industries have lagged in performance. Clearly, the slowdown in the Western world is having a negative impact on export-oriented industries while companies with high domestic exposure are faring better. The silver lining has been positive management commentaries by rural-focused companies. First time after Covid-19, rural demand seems to be picking up. The festive demand has been good & long winter wedding season augurs well for the continuation of consumption demand.

What is your perspective on expenditure patterns of Indian consumers in the latter half of the current fiscal year, taking into account the festive season and impending elections?

Urban consumption has held on well in the last couple of years. Now, possibly first time after Covid-19 there are green shoots in rural consumption as well. The festive season has been good for discretionary goods & we believe it may continue as consumption in 'Bharat' improves. The impending union election may see some populist measures in the first half of the calendar year 2024. This is further expected to stimulate income and consumption in the rural segments.

Can you shed some light on the Balanced Advantage Fund (BAF) that the company has recently launched?

At Bajaj Finserv AMC, we believe that the equity market is influenced by both fundamental and behavioural factors. Fundamental factors include economic variables (like GDP growth, interest rates, inflation, industrial production, current account deficit etc) and corporate aggregates (like revenue outlook, earnings outlook, balance-sheet strength etc). The Behavioural factors, on the other hand, encompass elements such as investor sentiment, herd mentality, underlying biases, and other similar behavioural aspects. Our model seeks to measure the changes observed in the fundamental and behavioural aspects of the markets. Based on those broad signals, our model is designed to strategically allocate between equities and debt assets.

Our fund management team monitors fundamental and behavioural elements prevalent in the market, utilizing an internally built composite indicator. This indicator is based on multiple inputs that capture trends in different markets such as currency fluctuations, commodity trends, fixed income premiums of key securities, and prevailing liquidity momentum in the market.

The NFO period of Bajaj Finserv Balanced Advantage Fund is from November 24, 2023, to December 8, 2023. We urge investors to get in touch with their financial advisors to know about our methodology in detail and participate in the wealth creation journey over the long term by investing in this uniquely designed mutual fund scheme.

Disclaimer: The article is for informational purposes only and not investment advice.