BS BFSI Summit: Keep expectations realistic, say fund managers to investors

At Business Standard's BFSI Summit 2025, top CIOs said investors should temper return expectations, stay invested, and maintain asset allocation as markets enter a more measured phase

Investors should keep expectations realistic, stay invested with discipline, and focus on asset allocation as markets move through a more measured phase, chief investment officers (CIOs) of leading fund houses said in a panel discussion at the Business Standard BFSI Insight Summit 2025.

 

Sankaran Naren, CIO, ICICI Prudential Mutual Fund, said India’s overall position remains stable, supported by sound macroeconomic factors. “India is in a better shape than a year ago,” he said during a panel discussion moderated by Samie Modak

 

“We have been telling investors to follow asset allocation, but we are now slightly more positive on equities than last year. We are in a moderate return situation but better than last year.”

 

 

Sailesh Raj Bhan, Chief Investment Officer – Equity, Nippon India Mutual Fund, said investors’ return expectations have not changed much despite recent market behaviour. “When we meet people, we realise return expectations haven’t shifted down,” he said. “Something or the other keeps working in different markets, so investors continue to look for quick gains.”

 

He said markets have become more balanced, with large caps delivering earnings-led performance. “Expectations should be moderate and aligned with earnings growth,” Bhan said. “The large-cap space is becoming more sensible, but this is not a period for very high returns.”

 

Mahesh Patil, CIO, Aditya Birla Sun Life Mutual Fund, said that while valuations have eased from earlier highs, the recovery ahead will likely be gradual. “A year ago, valuations were at a premium, and growth had slowed. Now liquidity conditions are easier, and valuations are more reasonable,” he said. “With growth expected to improve, the outlook looks better than it did last year.”

 

Rajeev Thakkar, CIO, PPFAS Mutual Fund, said investors should stay focused on their investment plans and avoid expecting unusually high returns. “The past year has seen limited movement in stock prices, though earnings have grown modestly,” he said. “There are still pockets where valuations are elevated. Equities can do better than fixed income over time, but expectations should remain realistic.”

 

From the debt market perspective, Rajeev Radhakrishnan, CIO – Fixed Income, SBI Mutual Fund, said the backdrop has turned favourable. “Debt valuations look more comfortable,” he said. “Inflation is not a concern, and liquidity conditions are supportive.” He added that while some policy easing may continue, most of it has already taken place.

 

Radhakrishnan said hybrid and asset allocation products are likely to attract more investor interest. “Flows into short-term fixed income funds have been limited,” he said. “Given the current tax framework, allocations to debt are increasingly coming through hybrid products.”

 

Several fund managers said a balanced investment mix helps investors handle periods of uncertainty. Naren said his fund house has been recommending hybrid and multi-asset products for the past two years. “These products help investors maintain balance during market corrections,” he said. “We have closed some small- and mid-cap funds for new subscriptions to avoid concentration risk.”

 

Bhan said maintaining clear communication with investors is also important. “Our focus is on explaining the kind of risk being taken,” he said. “We encourage investors to commit money they will not need for at least five to seven years, and to invest through systematic investment plans. Asset allocation helps manage risk better.”

 

Patil said strong inflows can make deployment more complex in certain market segments. “When large amounts come into specific categories such as small caps, it becomes difficult to invest without affecting valuations,” he said. “We manage this by spreading investments across a wider number of stocks.”

 

Thakkar said his fund avoids being fully invested at all times if suitable opportunities are not available. “We prefer to deploy when we find reasonable valuations,” he said. “If we don’t, we wait. It’s better to stay patient than to force deployment.”

 

On new listings, Bhan said funds need to be selective. “In any strong market, supply increases,” he said. “Our focus is on buying the right business at the right price. If that does not fit, we stay away.”

 

Naren said that large inflows into equities shift the responsibility of allocation directly to investors. “In this cycle, most capital is being allocated through mutual funds and similar products, not banks,” he said. “If allocation goes wrong, the investor bears the risk. Many believe equities are risk-free, but that is not the case.”

 

Across equity and debt, the panellists emphasised discipline, diversification, and a focus on long-term goals.

 

“Investing is not arithmetic,” Naren said. “No one can predict markets, but maintaining asset allocation and a diversified approach helps investors have a steadier experience.”