Mid & smallcaps will consolidate till earnings recover, says Shridatta Bhandwaldar
Shridatta Bhandwaldar
, Head of Equities at Canara Robeco AMC, believes India's equity story needs a more balanced, professionally managed
asset allocation
approach. In this interview, he breaks down the rationale behind launching the
Canara Robeco Multi Asset Allocation Fund
and his outlook on small and midcap stocks.
Edited excerpts:
What was the core insight or market gap that inspired the launch of the Canara Robeco Multi Asset Allocation Fund—why now, and why this mix?
Investors and households are persistently making asset allocation choices between – equities, fixed deposits, real estate, fixed income, precious metals etc. Fundamentally when you look at current asset allocation in a typical Indian household, it's skewed towards Fixed deposits and real estate. When you look at this skew – you know that there is a need for a professional approach to asset allocation to find a balance between risk and returns. Also, we observed that investors are either hyperactive or passive in their asset allocation approach. Fundamentally, Canara Robeco Multi Asset Allocation Fund will help investors to professionally manage asset allocation between equity & equity related instruments, debt instruments and Gold and Silver Exchange Traded Fund (ETF). We believe that there is a need for this product and as CRAMC, we can add value to investors through this category. Gross equity of 65% is chosen to ensure superior risk adjusted returns over period and equity taxation benefits. This apart, on 'why now'; in our opinion, Multi Asset Allocation Fund, being an all-weather category, timing the launch of the product has low relevance.
Multi-asset strategies sound like the new black in a volatile world. How does your fund navigate the current global uncertainties—be it sticky inflation, shifting central bank tones, or geopolitical jitters?
Canara Robeco Multi Asset Allocation Fund will be an interplay of equity (net equity of 30 %-80%, Gross equity of 65%), debt (10-25%) and precious metals (10-25% of Gold ETF/ Silver ETF). These assets have low or inverse co-relation with each other – thus reducing volatility of outcomes through cycles. While optimal equity allocation would help in enhancing returns through cycles; Gold ETF/Silver ETF and fixed income will enhance downside protection and act as a hedge against inflation / economic or geopolitical uncertainty respectively. This product is a good way to manage volatility and generate optimum returns across cycles.
Investors love returns, but they hate surprises. What kind of risk-adjusted performance or consistency can investors realistically expect from this new fund?
Based on category returns – one should expect returns in excess of fixed income with much lower volatility than any single asset class may generate.
What's your call on
equity valuations
, especially in mid and small caps?
Current valuations of mid and small caps are between 22-25x FY27 consensus earnings. This is 10%-15% higher than historical valuations and thus we expect consolidation in them till corporate earnings improve meaningfully. It is to be noted here that FY25 earnings growth has been low single digit so far.
Are Indian markets priced for perfection, or do you still see underappreciated sectors where the story is just beginning?
Large caps are largely in the fair value zone whereas mid and small caps continue to be expensive as highlighted in the previous question. Markets at all points in time have sectors which are expensive and others which are under-appreciated. We think pockets in discretionary consumption, financials and global cyclicals, building materials, etc. are under appreciated in the current market.
Domestic
SIP flows
are holding the fort even when FIIs get cold feet. How sustainable is this retail resilience and can it shield us in the event of a global risk-off?
Indian household's equity allocation through SIP has been resilient. If corporate earnings revive in FY26 from the current low single digit in FY25; this trend might continue for a longer period. These flows help in increasing our markets' resilience against global events.
If you had to bet on just one theme for the next 12-18 months - be it consumption, manufacturing, AI, or energy transition—where would you place your chips?
We don't think one should bet on one theme. We see markets in the next 12-18 months to be more bottom-up than top down and thus one needs to find out good opportunities across consumption, manufacturing and energy transition. There are limited plays on AI transition in India. One might find more bottom-up ideas in consumption over next 12-18 months against the other themes.
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