BFSI summit: Top mutual fund CIOs advise caution amid global uncertainty

Industry leaders said high liquidity and limited supply in certain segments, especially mid- and small-caps, have made deployment challenging and pushed valuations higher

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Investors should temper expectations and stay cautious as global valuations, especially in US technology stocks, remain elevated, said top mutual fund chief investment officers (CIOs) at the Business Standard BFSI Insight Summit 2025 in Mumbai on Friday.

 

In a panel discussion titled 'One year of poor returns. Does it matter', S Naren (ICICI AMC), Rajeev Thakkar (PPFAS AMC), Sailesh Raj Bhan (Nippon AMC), Mahesh Patil (Aditya Birla Sun Life AMC), and Rajeev Radhakrishnan (SBI AMC), discussed market volatility, India’s underperformance, and the outlook for equities and debt.

Growth temporarily slowed

Patil attributed India’s underperformance to slower earnings and tighter policies. “India’s relative valuations versus other emerging markets had peaked,” he said. “Corporate earnings growth slowed to single digits, and restrictive fiscal and monetary policies added pressure.”

 

However, the industry leaders agreed that the country is back on the growth track. Patil said: “With recent stimulus in the Budget and consumption recovery, we expect improvement ahead. Consumption, which was lagging, should get a boost due to goods and services tax (GST) cuts. Banking sector liquidity has also eased. Hence, corporate earnings growth should pick up.”

 

Meanwhile, Thakkar cautioned against expecting “hyper-normal” returns. “The last 12–15 months have gone by without major stock price movement,” he said. “Earnings have improved, but valuations in certain segments remain exuberant. Don’t expect explosive returns; equities should still outperform bonds over five years, but expectations must be realistic.”

Favourable outlook for debt markets

Radhakrishnan said the macro backdrop is positive for debt investors. “For the first time in years, we are not worried about inflation,” he said. “The RBI has created a favourable environment with policy easing and liquidity support. Fixed income markets now have the potential for stable, moderate returns.”

 

He added that there is "some more elbow room" for the RBI to ease interest rates. "Once that happens, there will possibly be a long pause,” Radhakrishnan said.

Fintechs expanding reach

Bhan said fintech platforms have broadened access to mutual funds. “Fintechs are doing a lot of the heavy lifting by reducing ticket sizes and bringing in new investors,” he said. “As the ecosystem matures, we’ll see more customers return to traditional fund houses.”

 

On the initial public offering (IPO) rush, he added: “In a bull market, supply is natural. It’s our job to ensure we buy the right business at the right price. When valuations look stretched, we prefer to stay cautious.”

Investors carry the risk

Naren said that investors now shoulder most capital allocation risks. “In 2005-07, banks were the primary capital allocators and bore the brunt when things went wrong. Now, the burden has shifted to investors through direct equities, mutual funds, PMS, and alternative investment funds,” he said. “What many people haven’t realised in this cycle is that it’s the investors who are taking on all the risk. Over different cycles, the responsibility for risk has shifted, and this time, it squarely rests on investors.”

 

Thakkar said investors should use the Liberalised Remittance Scheme and GIFT City platforms for global diversification, noting that “overseas is available but it’s just that mutual funds don’t have much interest yet". He cautioned against chasing gold and silver after their sharp rally driven by central bank buying, saying such assets lack cash flow and are “inherently unpredictable".