BFSI Insight Summit: Look beyond volatility, MF CIOs tell investors

At the BFSI Insight Summit 2026, mutual fund CIOs urged investors to look beyond market volatility, diversify across assets and focus on valuations, earnings and long-term goals

Leading mutual fund (MF) executives on Wednesday said investors should focus on valuations, long-term earnings potential and asset allocation rather than chase recent market winners as global uncertainty reshapes investment opportunities.

 

S Naren, chief investment officer (CIO), ICICI Mutual Fund; R Sivakumar, CIO, Axis Mutual Fund; Taher Badshah, president and CIO, Invesco Mutual Fund; Harish Krishnan, CIO-Equity, Aditya Birla Mutual Fund; and Nimesh

 

Chandan, CIO, Bajaj Asset Management, said this during a discussion titled Navigating Uncertainties and Volatile Markets at the Business Standard BFSI Insight Summit. They cautioned against making investment decisions based solely on recent returns or headline indices, and argued for portfolios to be built around fundamentals, valuations and an appropriate mix of asset classes.

 

 

On sector rotation, Krishnan said his approach considers four factors: A sector’s share of corporate profits, its market capitalisation relative to its profit contribution, investor ownership levels and the source of recent returns.

 

Using this framework, he said technology, consumer businesses (including staples), private-sector banks and insurance companies offered opportunities after periods of weak performance and subdued investor sentiment. These sectors, he argued, could benefit as expectations improve from relatively low levels.

 

By contrast, Krishnan said he was more cautious about capital markets, defence and capital goods, where elevated expectations may already be reflected in share prices. He added that active fund management required investors to assess individual businesses rather than avoid entire sectors simply because of concerns such as artificial intelligence (AI) disrupting the technology industry.

 

The panellists said the prolonged period of market volatility has created frustration, particularly among investors who entered the market during the post-pandemic rally.

 

On biases that investors and fund managers fall for, Chandan pointed out that during downturns, a few biases start impacting decisions, especially in a market that has been volatile for two years. “This has come after four years where spectacular money was made. Everybody was making money almost every month. So, these past two years, there has been a lot of dejection and frustration,” he said.

 

“Because of war and the volatility in oil, there is fear, a difficult emotion to control. People actually end up selling at lower levels and then probably chasing stocks higher with good news... Between fund managers and new investors, there is one big difference: Experience. Since they have seen the cycle earlier they know when there is an opportunity,” Chandan added.

 

On investor experience in recent years, Sivakumar pointed out that the number of demat accounts had risen from around 50 million to 1.5 billion, while mutual fund investors had increased from approximately 25 million to 60 million. Many of these investors, he said, had experienced years of rising markets before encountering a prolonged period of weaker performance — this can lead investors to judge the entire market by the performance of the Nifty, even when other market segments are behaving differently. He noted that mid and smallcap stocks had reached new highs in the preceding month, despite pressure on largecap stocks.

 

Sivakumar said the industry needed to help new investors understand market cycles rather than interpret a period of sideways movement as evidence that equities had become unattractive. “Fear can also distort decisions. Investors may sell during a downturn and return only after prices have risen, effectively doing the opposite of what would be beneficial,” he said.

 

Naren talked about how in order to make money in the long run, one has to actually bet against the money flow. “You look at a very simple formula. If there is a year where foreign institutional investors and mutual funds are both very good, you have to actually sell equity… So, you have to go in the opposite direction of where the money flows,” he said.

 

Krishnan recommended that investors establish a clear investment process, use checklists to assess opportunities and consider both bullish and bearish scenarios before committing capital. “Pre-commitments — such as deciding in advance how to adjust equity or fixed-income allocations at specified market levels — can help investors avoid emotional decisions,” he said.

 

Badshah said that investment choice should be across the midcap, smallcap and largecap stocks. “Decision-making at a broader index level will lead to wrong outcomes,” he said, pointing out that it is important to dissociate from the headline indices and look at how you can create a portfolio that is a decent mix of small-, large-, midcap, or growth versus value.

 

He indicated that investors also need to take a counter-cyclical call, whether in terms of flows or valuation: Buy cheap and sell from the expensive. “So, it is important that we keep the right balance in terms of buying things that probably provide a value proposition, blending it along with some stories which you believe are probably going to continue on the growth path,” Badshah added.

 

“If you can stay in the game, then some of the valuation-related challenges will be overcome with time, especially if that company or stock does well from a business or fundamental standpoint,” he said.

 

The discussion also challenged the tendency to treat equity as the default investment destination. Sivakumar said the frustration in Indian equities was not necessarily a consequence of interest rates or the bond market. Instead, it reflected the expectations of investors who had become accustomed to strong returns, alongside disappointment that overseas markets had performed better. He argued that Indian bonds offered an attractive opportunity at prevailing yields. With the 10-year government bond yield around 7.5 per cent and the 30-year yield approaching 8 per cent at the time of the discussion, he said investors should consider fixed income as part of a broader portfolio.

 

Naren similarly argued that debt had been overlooked in the rush towards equities. He said investors needed to think in terms of asset allocation rather than choosing one asset class over another.

 

With overseas equities outperforming India in recent periods, global diversification was another major theme. Krishnan said he would personally limit overseas investments to around 10 per cent of his portfolio, maintaining a strong allocation to India. He argued that rupee depreciation alone was not a sufficient reason to move away from Indian equities, as some domestic companies benefit from dollar-linked revenues or commodity-related pricing.

 

However, he acknowledged that overseas exposure could provide access to industries and technologies that are less represented in India, including certain areas of biotechnology and AI.

 

Sivakumar warned against treating global diversification as an exercise in buying whichever market had performed best in recent years. Investors who chase the US technology market, precious metals or other recent winners risk entering after much of the rally has already occurred. He said global investing could make sense over the long term, but investors needed to consider valuations, timing and their understanding of the assets they were buying.

 

Badshah further argued that investors should compare the long-term earnings potential of different markets rather than focus only on short-term performance. India’s potential for faster earnings growth, he said, remained an important consideration, even as global exposure could provide access to sectors and technologies unavailable domestically.

 

Chandan emphasised that diversification should extend beyond international equities to other asset classes, including commodities, precious metals, real estate investment trusts and infrastructure investment trusts. He suggested that multi-asset allocation strategies could help investors gain exposure to different opportunities while reducing dependence on any single market.

 

However, he cautioned that success would depend on how effectively a portfolio identified turning points and adjusted allocations across asset classes.

 

The discussion ended with a common message: Volatility and uneven market performance should not automatically prompt investors to abandon their investment strategy.

 

The panellists stressed the importance of understanding market cycles, balancing growth and value, maintaining exposure to different asset classes and resisting the temptation to follow recent winners. While global diversification can broaden investment opportunities, the fund managers cautioned that it should be guided by long-term objectives and valuations rather than fear of missing out.

 

For investors navigating uncertain markets, the challenge is not simply to identify the best-performing asset class today, but to construct a portfolio capable of withstanding changing conditions and delivering sustainable outcomes over time.