Kiran Asso Pvt. Ltd.

Mr. Rahul Goswami

Chief Investment Officer - Fixed Income, Franklin Templeton Mutual Fund.

Rahul Goswami is chief investment officer (CIO) and managing director at Franklin Templeton, Fixed Income in India. In this role, Rahul oversees the fixed income functions of the locally managed and distributed debt schemes of Franklin Templeton Mutual Fund. Rahul was previously the CIO of fixed income at ICICI Prudential Asset Management (I-Pru) and a key contributor to the success of I-Pru's fixed income funds in India. Prior to I-Pru, he was a member of the Franklin Templeton India Fixed Income team, serving as portfolio manager from 2002 to 2004. Rahul also brings a wealth of experience from his time at well-regarded banks such as Standard Chartered Bank and UTI Bank. He has over 24 years' experience in managing fixed income funds. Rahul earned his M.B.A. and his bachelor's degree in science from Bhopal University.

Please note we have published the answers as it is received from the Fund Manager of Franklin Templeton Mutual Fund.

Q1. With the RBI holding the repo rate steady with a neutral stance while raising its inflation forecast amid global oil and supply-side risks, what are your expectations for the rate trajectory going forward?

Ans: As we look at the global interest rate environment, particularly in the United States, financial markets are currently pricing in the possibility of two additional rate hikes by the U.S. Federal Reserve over the next three quarters. This view is supported by the fact that U.S. economic growth continues to remain resilient, inflation has not cooled as much as anticipated, and unemployment remains relatively low at around 4.3%.

Given this backdrop, we do not believe the global interest rate environment can be described as particularly benign. The Reserve Bank of India (RBI) will remain mindful of external developments and global monetary policy trends. However, in our view, domestic economic factors will continue to play a much larger role in determining the direction of Indian interest rates.

Q2. Interest rates influence almost every asset class, from bonds to equities. How should investors understand the transmission of interest rate changes across different asset classes, and what are the key channels through which they affect investment returns?

Ans: Interest rates have a broad-based impact on the economy and different sectors could have varying degrees of sensitivity to changes in interest rates. Sectors like banks and NBFCs could see their net interest margin rising or declining with increase or decrease in interest rates respectively. Higher interest rates could discourage borrowing and reduce demand for real estate and consumer discretionary sectors. Higher interest rates raise borrowing costs for companies and could lead to postponement of capital expenditures.

On the fixed income side, bond yields are influenced by interest rate expectation. Bond yields and prices have an inverse relationship. Rising interest rates negatively impacts bond prices across tenures. Bonds with longer maturity profile are relatively more sensitive to changes in interest rates than bonds with shorter tenures. In a rising interest rate scenario, investors would prefer positioning at the lower end of the yield curve to reduce the negative impact of rising bond yields.

Q3. Investors often associate debt funds with safety, but different categories carry very different risks. How should investors understand the trade-off between credit risk and interest rate risk while selecting a debt fund?

Ans: Investors in fixed income markets are exposed to liquidity risk, credit risk and interest rate risk. The regulator has defined the broad categorization of fixed income mutual funds based on their maturity and credit risk profiles. For a conservative investor seeking to build an emergency corpus, a liquid fund would be more suitable than a long-distance fund as a liquid fund invests in money market instruments with very short maturities and carries relatively less interest rate risk. On the other hand, an investor seeking to benefit from decline in interest rates could take exposure to long-distance funds as they are more sensitive to interest rate changes. Investors seeking higher accrual gains often seek funds with higher yield to maturity. However, higher yields could often be associated with higher credit risk due to exposure to bonds with relatively lower credit ratings. This increases the credit risk of the fund and investors should be aware when taking exposures on the basis of higher yields.

Q4. Higher portfolio yields can appear attractive, but they often come with additional risks. Why should investors avoid selecting debt funds based solely on yield, and what other factors deserve equal attention?

Ans: Higher yields are often associated with higher credit risk. Investors should evaluate the portfolio quality and avoid funds with a predominantly lower credit profile if such funds are not in line with their risk appetite. Further, it would be prudent for investors to align their investments with their investment horizon and risk profile. Investors should take the help of mutual fund distributors and financial professionals who can help them select suitable funds to meet their financial needs.

Q5. In a credit market where external ratings may lag real developments, what does your in-house credit evaluation framework look like — and how do you assess a company's true debt-servicing ability?

Ans: At Franklin Templeton, we adopt a robust investment framework for credit evaluation and portfolio construction. We go beyond ratings through in-house research by leveraging our strengths on the equity research side. Our investment process begins with our macro-economic view with an in-depth analysis of macro factors, quantitative analysis and forecast of future macro trends. Further, we undertake an in-depth credit analysis, asset-liability match and yield curve analysis for issuers to be included in our portfolio. We regularly monitor and evaluate the credit profile of issuers in our portfolios and seek to maintain high quality portfolios comprising sovereign securities and high rated corporate debt instruments.

Q6. What are the most important parameters investors should evaluate before selecting an Arbitrage Fund or a Liquid Fund? Beyond recent returns, what factors deserve close attention, and what are the common mistakes investors should avoid while evaluating these schemes?

Ans: Arbitrage funds are equity-oriented hybrid mutual funds that seek to generate returns by simultaneously taking offsetting positions in the cash and derivatives markets. They aim to capture arbitrage opportunities arising from temporary price differences between the two markets, while minimizing directional equity market risk through hedged positions. These funds are suitable for investors seeking a temporary parking avenue for money to be invested or deployed elsewhere. Since these are equity-oriented funds, the taxation applicable to capital gains from these funds is similar to equity funds. Investors should evaluate the performance of these funds over different market cycles to assess their volatility and select funds which align to their risk appetite. The investment horizon for investing in arbitrage funds could be from few months up to a year.

Liquid funds invest in money market instruments with maturity up to 91 days. This makes them suitable for very conservative investors with an investment horizon of few days to a month. This can be a suitable option for investors seeking to create an emergency corpus which can be accessible anytime with relatively less volatility. Investors can seek the services of mutual fund distributors and financial professionals for selecting funds suitable for their needs.

Note: The responses and views presented in this document have been provided by the investment team of Franklin Templeton Asset Management (India) Pvt. Ltd.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Mr. Janakiraman Rengaraju

Portfolio Manager - Equity, Franklin Templeton Mutual Fund.

Janakiraman Rengaraju is vice president and portfolio manager for Templeton Global Investments. He manages several equity strategies, including Franklin India Prima Fund, Franklin India Opportunities Fund, and Franklin India Smaller Companies Fund. He is also co-portfolio manager for Franklin India Equity Advantage Fund, Franklin India Equity Fund, and Franklin India Taxshield. Mr. Rengaraju has been in the investment management Industry since 1997. He started his career with Franklin Templeton in 2007. Prior to joining Franklin Templeton he was managing the investment corpus of Indian Syntans Group, a Chennai based privately held group of companies. Before this he worked for UTI Securities, Mumbai. Mr. Rengaraju earned a Post Graduate Diploma in Management from the Indian Institute of Management, Bangalore, in 1995 and a Bachelor of Engineering from the Government College of Technology, Coimbatore, in 1992. He is also a Chartered Financial Analyst (CFA) charterholder

Please note we have published the answers as it is received from the Fund Manager of Franklin Templeton Mutual Fund.

Q1. With markets recovering despite a mixed global macro environment, do you believe the worst of the recent headwinds is behind us? What indicators would you watch to distinguish a durable trend change from a temporary relief rally?

Ans: The immediate pressure on markets appears to have eased, though it may be premature to conclude that all headwinds are behind us. Moderating tensions in West Asia and Brent crude returning closer to pre-conflict levels have reduced near-term risks to inflation, the currency and India’s external position.

Valuations have also become more reasonable. MSCI India’s premium to MSCI Emerging Markets narrowed to 75%, from 119% in 2025 and 164% in 2024. On a price-to-book basis, the premium declined from 164% in August 2024 to around 37%, below its 10-year average of 93%.

However, valuations alone cannot sustain a recovery. India’s earnings are closely linked to domestic growth, making broad-based profit growth and actual earnings delivery critical. The weak start to the monsoon also warrants monitoring, although healthy reservoir levels offer some cushion.

• Earnings: Profit growth should broaden across sectors and earnings revisions should stabilise. Consensus currently indicates an earnings trajectory of ~ 12% to 14% CAGR over FY27–FY28.

• Domestic demand: Credit growth, automobile sales, power consumption, cement volumes, rural wages and private capital expenditure should remain resilient.

• Macro stability: Crude oil, inflation, the monsoon and the rupee will influence consumption, corporate margins and investor confidence.

• Market breadth and flows: Domestic institutions invested USD 8.7 billion in June 2026, offsetting FPI outflows of USD 3 billion. With global investors still underweight India, stronger earnings visibility and lower currency volatility could support a gradual return of foreign flows.

Overall, while macro risks have not fully receded, the combination of more reasonable valuations, gradual earnings recovery and sector-specific opportunities suggests a healthier medium-term outlook for Indian equities.

Q2. Investors often focus on buying good businesses, but even great companies can become poor investments if purchased at excessive valuations. How do you strike the balance between business quality and price while making investment decisions?

Ans: Quality and valuation are two parts of the same investment decision. A strong company can still produce a weak investment outcome if its market price already assumes near-perfect execution.

We assess quality through the company’s growth runway, competitive position, earnings visibility, governance, management capability, cash-flow generation and return on capital. We also examine whether the business can sustain its advantages and adapt to changes in technology, regulation and competition.

We then estimate intrinsic value using methods appropriate to the business and test the assumptions under base, upside and downside scenarios. A durable and predictable company may justify a higher valuation than a cyclical business, but quality does not justify an unlimited price. Equally, a low valuation is not attractive if governance is weak, capital allocation is poor or the business is structurally deteriorating.

The objective is to invest in businesses capable of compounding value over time, but only at a price that provides a reasonable margin of safety. This may require waiting for a better entry point or reducing exposure when valuation moves materially ahead of fundamentals.

Q3. Investors and even distributors often judge funds and markets on point-to-point returns, which can look dramatically different depending on the start and end date chosen. Why do rolling returns offer a fairer picture of both fund performance and the equity investing experience, and how should investors use them to set realistic expectations?

Ans: Point-to-point returns capture only one investment period and can be significantly influenced by the dates selected. Rolling returns offer a more balanced assessment by measuring performance across multiple entry points and market cycles. For example, five-year rolling returns evaluate every available five-year holding period rather than a single start and end date.

This helps investors assess return consistency, the range of outcomes, downside experience and performance relative to the appropriate benchmark. For long-term equity funds, five-year or longer rolling periods are generally more meaningful.

Investors should focus on the median return, dispersion of outcomes and benchmark-relative consistency rather than the best historical result. Rolling returns cannot predict future performance, but they provide a more realistic basis for viewing equity returns as a range of possible outcomes rather than a fixed or assured number.

Q4. Wealth in equities is often attributed to picking the right fund or timing the right entry, yet history suggests the holding period matters far more than either. From your experience across market cycles, what truly separates investors who compound wealth over 15–20 years from those who don't?

Ans: The main difference is generally not the ability to forecast market turning points, but the discipline to follow a suitable investment plan across multiple market cycles. This means starting early, investing consistently, increasing contributions as income grows and remaining committed during market corrections.

Equally important is maintaining an asset allocation aligned with one’s need, risk appetite, liquidity needs and investment horizon. For needs more than five years away, diversified equity categories such as flexi-cap and multi-cap funds can provide exposure across market capitalisations and sectors, while the SIP route can help investors use market volatility to accumulate more units at lower prices.

Starting early is equally important. To target ₹5 crore by age 60, assuming a 12% annualised return, an investor beginning at age 30 would need to invest approximately ₹14,165 per month. Delaying the start by five years would increase the required monthly investment to around ₹26,350.

Fund selection and entry valuation still matter, but long-term wealth building is often shaped more by time, rising contributions and the ability to avoid emotionally driven exits. The greatest advantage is not one perfectly timed decision but allowing a disciplined investment plan sufficient time to compound.

Q5. Every fund manager follows a distinct investment style, and every style goes through phases of being out of favour. Assume if your scheme is currently underperforming, what would be your advice to investors? How should they decide whether to remain patient or consider switching?

Ans: Underperformance should be reviewed, but recent returns alone should not drive an exit. Investors should first determine whether the weakness reflects a temporary phase for the fund’s investment style or a more fundamental concern.

Patience may be appropriate if the fund remains true to its mandate, the investment team and process are stable, portfolio holdings continue to be supported by fundamentals, and the risk profile remains consistent with the stated strategy. For instance, a quality- or valuation-oriented fund may temporarily lag when markets favour momentum or highly valued themes.

The assessment period should also match the fund’s investment horizon. A few quarters may be insufficient to judge a long-term equity strategy. Performance should be evaluated against the appropriate benchmark and comparable peers, preferably across a broader market cycle.

A switch may be considered if there is persistent style drift, a material change in the investment team or process, deterioration in portfolio quality, unexplained risk-taking, deviation from the scheme mandate, or sustained underperformance that cannot be reasonably linked to the fund’s stated style.

The key is to distinguish between temporary underperformance within a credible investment process and evidence that the original reason for investing in the fund has weakened.

Q6. SEBI data shows the vast majority of retail F&O traders lose money, yet derivatives volumes keep rising while the same investors hesitate to commit to long-term SIPs. What explains this paradox, and how can the discipline of investing be made as compelling as the excitement of trading?

Ans: The paradox is largely behavioural. Derivatives offer instant feedback, frequent opportunities and large market exposure for a relatively small upfront amount. This combination can make trading feel more rewarding than the gradual progress of long-term investing, even when the probability of success is low. SEBI’s study found that 93% of individual equity F&O traders incurred losses between FY22 and FY24, with aggregate losses exceeding ₹1.8 lakh crore.

Trading activity has nevertheless continued to expand. In 1QFY27, the average daily number of options contracts on BSE increased 91% year-on-year to 156 million, while MCX recorded a 248% rise to 13.8 million contracts. Easier access, leverage, overconfidence and the urge to recover earlier losses can keep participation elevated despite poor aggregate outcomes.

The SIP journey presents a more constructive picture. Aggregate SIP flows grew approximately sevenfold at a 26% CAGR between FY17 and FY26. As of May 2026, total SIP accounts stood at 10.47 crore, up 15.6% year-on-year, while SIP assets increased 17% to ₹17.12 lakh crore.

The industry also registered 54.16 lakh new SIPs during May, although registrations were 8% lower year-on-year. Importantly, the share of SIP assets held for more than five years increased to 31% in March 2026 from 30% a year earlier, indicating a gradual improvement in holding behaviour. Monthly SIP contributions subsequently reached ₹31,781 crore in June 2026.

To make investing more compelling, its progress must be made visible. Linking SIPs to specific needs, tracking milestones, automating contributions and periodically increasing the investment amount can provide a stronger sense of achievement.

Investing need not replicate the excitement of trading. Its appeal should come from turning regular contributions into measurable progress towards long-term financial needs.

Source: Internal Research
Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

Mr. Ardhendu Bhattacharya

Chief Investment Officer - Fixed Income, SBI Mutual Fund.

Mr. Ardhendu Bhattacharya has over 16 years of experience in the financial sector. He joined SBIFML in April 2019 and currently holds fund management responsibilities. Prior to this, he was associated with ICICI Bank and Citibank N.A., where he held roles involving trading in money markets, short-term corporate bonds, and currency and trade sales.

Please note we have published the answers as it is received from the Fund Manager of SBI Mutual Fund.

Q1. The Indian rupee has witnessed depreciation pressure in recent months despite India's relatively strong macroeconomic fundamentals. How should investors interpret this weakness? Is gradual currency depreciation a natural feature of a growing emerging economy, and what are your views on the outlook for the rupee over the medium term?

Ans: RBI & GOI have taken steps to stem the depreciation of INR recently. High global yields and elevated oil prices have been the main concerns for USD/INR and any resolution on the middle east crisis should act as a tailwind for INR as FPI flows return. However, we believe more steps are needed to attract longer more durable capital and that remains a key monitorable.

Q2. Investors often focus on the returns generated by debt funds but pay less attention to the risks taken to achieve them. What are some common misconceptions investors have about fixed income investing, and how can they evaluate debt products more effectively?

Ans: Portfolio construct is the most important thing to analyze while investing in a fixed income fund. Also understanding fund manager and AMC positioning in context of overall macro environment is important as it helps one take a call on the market.

Q3. With geopolitical tensions continuing to influence global markets and Brent crude prices remaining a key variable for India, how do you assess the potential impact on India's G-Sec yields? To what extent could higher oil prices and external uncertainties alter the outlook for inflation, RBI policy, and the domestic bond market?

Ans: The worst seems behind us in the near term, while the way down won’t be a one way street both yields as well as USD/INR might have made their respective near-term peaks. The tail risks of interest rate defense has been priced out and we believe conventional monetary policy will resume as markets normalize. Expect volatility, none the less markets should be well behaved till the second half of the year comes by and enhanced borrowings by center and states hit the markets.

Q4. Gold has delivered strong returns amid geopolitical uncertainty, central bank buying, and concerns around global debt levels. In the current environment, how should investors think about gold's role within a diversified portfolio alongside traditional fixed income allocations?

Ans: Gold has been under pressure in the reflationary trade as yields spike worldwide, but easing concerns on west Asia should support the category in the near term. Investors should look at commodities as part of their asset allocation and not chase near term trends. A repeat of last years tear away rally is unlikely as these categories tend to mean revert in the medium term.

Q5. India's decision to exempt certain foreign investors from taxes on government bond investments and broaden access to the debt market is expected to enhance its attractiveness as a fixed income destination. How significant could these measures be in driving foreign participation, and what impact might they have on bond yields and the evolution of India's debt market?

Ans: It has helped already, we have seen almost 20k crs hitting the markets since policy day. FCNRB and ECB related measures should also attract foreign capital to the tune of 40-50 billion USD and this will chase domestic assets including bonds. Yields have cooled off and the curve has steepened in anticipation of these flows. The success of the FCNRB scheme will determine the extent of softening in domestic markets, we believe there is value at the shorter end for some further easing.

Q6. As investors transition from wealth building to wealth preservation and income generation, how should they think about SWPs from mutual funds compared with annuities and traditional deposits? What withdrawal rates do you believe are sustainable, and which fund categories would you recommend for retirees seeking regular income?

Ans: For a retiree a mixture of accrual and duration within the overall asset allocation is key.

We like high grade credit portfolios like corporate bond and accrual products like medium duration along with gilt and long duration for this.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Mr. Pradeep Kesavan

Chief Investment Officer - Equity, SBI Mutual Fund.

Pradeep is the Equity Strategist with SBI AMC and has over 20 years’ experience panning Corporate Finance, Corporate Strategy, Investment analysis, and research. He has worked extensively in public as well private markets across areas like equity strategy, private equity due diligence, M&A and Corporate strategy, merger integration as well as analysis of corporate fundamentals and strategies using proprietary frameworks. As the equity strategist he tracks and analyses key macro as well as micro factors that affect capital markets using a combination of quantitative and fundamental techniques to provide sector allocation calls. Pradeep joined SBI AMC in Jul’21. Prior to SBI AMC, he has spent 9 years with Morgan Stanley, 4 years in Accenture Strategy Consulting and 4 years with Elara Capital as Equity Strategist. He holds a Bachelor’s degree in Commerce, Masters in Business Administration and is a CFA Charter holder.

Please note we have published the answers as it is received from the Fund Manager of SBI.

Q1. Despite sustained FII selling in recent months, domestic institutional flows and SIP contributions have continued to absorb the pressure. How significant is this structural shift towards domestic ownership of Indian equities, and does it fundamentally change how investors should think about market resilience going forward?

Ans: FII’s ownership in Indian Equities has seen a sharp decline over the last 5 years. From ~20% in 2020, its now down to ~16%. Correspondingly, domestic institutional share has increased from ~16% to ~19.5% currently. However, there is some evidence to suggest that while domestic participation makes markets more stable and resilient, FIIs tend to contribute more towards market direction (both upside and downside). Therefore, from a retail investor perspective, they could expect a more stable market profile as domestic investors’ share in the market increases.

Q2. Even as markets have remained in a prolonged consolidation phase, corporate earnings have continued to compound- meaning valuations have quietly moderated from their peaks. Does this reset improve the risk-reward for long-term investors, and what triggers could drive the next sustained up-move in Indian equities?

Ans: Yes, from the peak valuation levels seen in 2024/25 levels, the market valuations (especially of largecaps) have corrected meaningfully and at current levels are trading close to long term averages. But having said that FY26 earnings growth came in at single digit on the back of a low base of FY25 (which was ~1% growth). So overall earnings delivery hasn’t been strong over the last two years. Looking ahead, there is a strong expectations for earnings recovery and we believe conditions look reasonable for a strong FY27. Receding macro (crude and currency) risks and improving geopolitics (US-Iran war, to lesser extent Russia-Ukraine) will be key catalysts.

Q3. After two years of sideways markets, many investors are seeing modest or even single-digit SIP returns and questioning whether SIPs "work." How should investors evaluate SIP performance during such phases, and why might continuing- or even stepping up- SIPs in flat markets matter most for long-term wealth building?

Ans: It is true that markets have been flat for the last couple of years now. This is par for the course in equity markets, where return expectations can’t be linear. Even at current levels, 3 year CAGRs look healthy. Therefore, retail investors should continue building their portfolios via SIPs. Investors who had continued their SIP discipline would be now sitting on a strong base of investments made at same level of NAVs for 2 years. When the markets restart their upward journey, the strong base of 2 years’ worth of investments will stand them in good stead.

Q4. Investors often evaluate active funds based on historical returns, but metrics such as active share can provide insight into how differentiated a portfolio is from its benchmark. How should investors interpret active share, and what role should it play when selecting active equity funds?

Ans: Investors in actively managed mutual funds do so with an expectation to outperform the benchmark indices. Therefore, there is an implicit expectation that the fund manager actively positions his/her portfolio in a manner to stand apart from the index. Active share is a measure of degree to which a portfolio stands apart from its benchmark. A higher active share therefore is an indication that the portfolio is more actively managed in the sense of it being materially different from the benchmark. However, there are nuances- one, standing apart from benchmark by itself is no guarantee that the returns will be “better” than the benchmark. It only ensures that the returns will be “different” from the benchmark. The onus of outperformance boils down to stock selection, even in portfolios with high active share. Second – there are times in market when a portfolio manager might want to reduce the benchmark risk in portfolio and reduce active share. In such cases the lower active share number is a deliberate call that the FM is taking. Therefore, “higher the better” is not always true when it comes to active share.

Q5. The recent concerns surrounding Rajesh Exports have highlighted how governance and disclosure-related issues can emerge even in well-known listed companies. What are some of the key warning signs that you look for when assessing management quality and financial reporting standards?

Ans: At SBI Mutual Fund, we have a robust forensic accounting framework that tracks multiple metrics over a long period of time. This framework also benchmarks these metrics vs other listed companies. So at any given point in time, we have a view on the accounting quality of any listed security and we know about the key red flags, if any. This is a broad and deep subject and a short answer will not do justice.

Q6. With markets volatile and range-bound, SIF strategies- particularly long-short and hedged approaches- are facing their first real test in Indian conditions. How have these strategies navigated the current phase, and does a sideways market actually make the strongest case for their inclusion in portfolios?

Ans: SIFs have been relatively new investment vehicles, and we believe the performance of such schemes needs to be assessed once we have a little longer time horizon of performance track record. Having said that, the long-short and hedged strategies are designed to generate positive returns in all market conditions and therefore they make a case for inclusion in investor’s portfolio when the markets trend sideways or downwards as well.

Source: Internal Research
Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

Mr. Prashant Pimple

Chief Investment Officer - Fixed Income, Baroda BNP Paribas Mutual Fund.

Mr. Pimple is a seasoned asset management professional with rich experience of over 26 years in Fixed Income segment. Currently, Mr. Prashant is the Chief Investment Officer – Fixed Income at Baroda BNP Paribas Asset Management India Pvt Ltd. Prior to this, he worked with Nippon India Mutual Fund for over 16 years as Senior Fund Manager Fixed Income. Other organizations that Prashant has worked with are Fidelity Fund Management, ICICI Bank, Bank of Bahrain and Kuwait, Saraswat Co-op bank and Small Industrial Development Bank of India. Mr. Pimple is a Commerce Graduate from Sydenham College of Commerce and Economics and has completed his MBA from Jamnalal Bajaj Institute of Management Studies (JBIMS). Additionally, he has also done ACTM, Chartered Treasury Manager course specializing in Treasury and Forex Management from The Institute of Chartered Financial Analyst of India.

Please note we have published the answers as it is received from the Fund Manager of Baroda BNP Paribas Mutual Fund.

Q1. In uncertain global environments, debt often becomes an important stabilizer within portfolios. How should investors think about debt allocation not merely as a return-generating asset, but as a tool for capital preservation, liquidity management, and portfolio balance?

Ans: Stability and visibility remain one of the key important reason for investing in debt funds. One should invest in debt funds as part of; a) overall portfolio allocation seeking achievement of near-term needs b) from liquidity perspective to achieve portfolio rebalancing if one wants to diversify into other asset classes and c) at the same time generating inflation adjusting real returns.

Q2. Many retail investors still compare debt funds directly with fixed deposits on return expectations alone. What are the key advantages debt mutual funds can offer over traditional deposits from a portfolio construction and liquidity perspective?

Ans: Debt mutual funds provide diversification, liquidity and tax efficiency as compared to many traditional products in their endeavor to achieve near term needs. Any debt fund comprises various exposures to highly rated money market instruments/bonds/sovereign paper subject to exposure limits within SEBI defined framework for single issuers, sector, group limits. This ensures that debt funds are well diversified. In addition, debt funds provide flexibility in terms of liquidity, across one’s investment journey. Debt funds can be redeemed even with a partial amount without affecting returns of the residual amount which remains invested. Also, liquidity norms by SEBI ensure requisite compulsory allocation to cash and sovereign assets in the portfolio. In case of debt funds, benefits of taxation at the time of withdrawal ensure better compounding impact over medium term.

Q3. With SEBI having defined so many debt fund categories, investors often find it confusing to choose the right one. How would you simply explain which debt fund category suits which investor need - by horizon, risk appetite, and need?

Ans: SEBI definition of debt fund categories was introduced to clearly define the investment framework within which debt fund managers can manage the fund and also to ensure transparency to match investor’s expectations. Unfortunately, various categories available create confusion for broad investors in terms of purpose and expectations. The simple thumb rule for any investor should be to match the investment horizon of its investment with the duration range of the various debt funds defined by regulator. In addition, investors should look at the credit profile of the underlying debt funds as well, as although higher credit quality ensures principal protection, but it comes at a slightly lower yield. So, based on the investment objective and horizon, one can decide its risk appetite and accordingly allocate to the appropriate fund.

Q4. Credit events in the past have made investors more conscious about risk within debt products. Beyond external ratings, what should investors evaluate while selecting debt funds to ensure alignment with their risk appetite and investment horizon?

Ans: The one good part of the past credit events is that the regulator has ensured tightening of framework within which issuers as well investors can transact. In addition to these tighter regulations, an investor should be aware of the credit process of the fund house, internal guard rails within which the investments are managed, the investment horizon and needs to be achieved for investing in those funds etc.

Q5. With recent volatility in crude oil prices and concerns around inflation resurfacing amid global geopolitical tensions, how do you see the outlook for interest rates and bond yields evolving in India?

Ans: Geopolitical tensions, higher commodities in general and oil prices in particular and depreciating currency has resulted in deterioration of outlook of inflation, CAD, BOP and Fiscal Deficit. The year going forward seems to be a year for carry trades instead of large capital gains. Realizing the same, funds at shorter end which run accrual strategies looks attractive as spreads remain higher than long term average over repo rate.

Q6. With the rupee influenced by factors such as oil prices, trade deficits, and global uncertainty, how important is currency stability for India’s broader macroeconomic outlook over the medium term?

Ans: A stable currency is of utmost importance as it not only affects inflation trajectory, trade deficits and fiscal deficits, but also affects capital allocation decisions from FPIs and FDI perspective. If the Indian rupee continues to reflect depreciation bias, we may get into vicious cycle of higher inflation, higher CAD, higher BOP, lack of flows and continue to remain underinvested from capital allocator versus rest of the emerging markets. This could undermine the medium-term growth trajectory and can lead to higher and longer inflation regime. Hence a stable currency remains a key important essential which policy makers would be keen to adhere to.

Disclaimers The material contained herein has been obtained from publicly available information, internally developed data and other sources believed to be reliable, but Baroda BNP Paribas Asset Management India Private Limited (BBNPP), makes no representation that it is accurate or complete. BBNPP has no obligation to tell the recipient when opinions or information given herein change. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. This information is meant for general reading purposes only and is not meant to serve as a professional guide for the readers. Except for the historical information contained herein, statements in this publication, which contain words or phrases such as ‘will’, ‘would’, etc., and similar expressions or variations of such expressions may constitute forward-looking statements. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. BBNPP undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. Words like believe/belief are independent perception of the Fund Manager and do not construe as opinion or advice. This information is not intended to be an offer to see or a solicitation for the purchase or sale of any financial product or instrument. The investment strategy stated above is for illustration purposes only and may or may not be suitable for all investors. The information should not be construed as investment advice and investors are requested to consult their investment advisor and arrive at an informed decision before making any investments. The Trustee, AMC, Mutual Fund, their directors, officers, or their employees shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages arising out of the information contained in this document. Past performance may or may not be sustained in the future and is not a guarantee of any future returns.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Mr. Sanjay Chawla

Chief Investment Officer - Equity, Baroda BNP Paribas Mutual Fund.

Mr. Chawla has over 35 years of experience in fund management, equity research and Management Consultancy. Currently, he is Chief Investment Officer - Equity at Baroda BNP Paribas Asset Management India Private Limited. In his prior roles, he has worked with Baroda Asset Management India Limited as Chief Investment officer, Birla SunLife AMC as Sr. Fund Manager-Equity, managing various schemes with different strategies. Mr. Chawla has also worked as Head of Research with SBI Capital Markets and in various capacities in the equity research space in Motilal Oswal Securities, IDBI Capital Markets, SMIFS Securities, IIT Invest Trust & Lloyds Securities. He is the fund manager for certain schemes of the Mutual Fund. Mr. Chawla is graduated with a Master of Management Studies from Birla Institute of Technology & Science (BITS), Pilani.

Please note we have published the answers as it is received from the Fund Manager of Baroda BNP Paribas Mutual Fund.

Q1. Following the recent government commentary around fuel conservation, gold imports, and external vulnerabilities, do you believe long-term investors should be concerned about the broader macroeconomic impact, or are these measures largely preventive steps reflecting prudent economic management?

Ans: In our view, the recent government commentary around fuel conservation, gold imports etc is more of a groundwork towards the possibility of an extended resolution to the West Asia conflict. As the conflict lingers and the disruptions in the Straits of Hormuz continues, crude/gas/petrochemical prices remain elevated. This is likely to place a downward pressure on GDP growth, an upward bias on inflation and a worsening current account deficit (CAD) placing pressure on the currency. It makes the situation for maintaining fuel prices less and less tenable. For long term investors, the currency and bond markets (OIS markets are tentatively pricing in 50bps rate increases by the close of FY27) have already recalibrated to a large degree. Equity has seen a small bounce from the lows of March when peace talks began and market may give up those rebound gains in case a truce is delayed. However, our health as an economy as we entered into this conflict is vastly different from say the global financial crisis years or the tech meltdown years. Valuations euphoria had already drained through CY2025 and our valuations have now reverted to mildly below long term levels. FII ownership is also at a multi-year low indicating no extended ownership. Retail leverage/margin financing etc have also been manageable. Yes, growth may be vulnerable and one could see 300-500bps of earnings cuts, but it would not be meaningfully large as an extension to impact on markets. This crisis may actually be a reasonable window for long term investors to get into markets. A resolution of the conflict would naturally translate to cool off in energy markets in 1-2 quarters, changing not only sentiments but also reducing the CAD and relieving the risks to growth and inflation.

Q2. Beyond financial metrics, how do you assess the qualitative aspects of a company while filtering stocks for long-term portfolios? What are the early signs that help you differentiate sustainable compounders from businesses benefiting only from short-term cycles?

Ans: We look at a triangulation of BMV - business, management and valuation to identify long term winners. A company’s ability to weather shocks and sustain its growth can stem from multiple sources - a technology proficiency, large scale driving competitiveness, ability to leverage on raw materials (e.g. access to high grade alumina for an aluminium producer) or labour costs (certain labour-intensive jobs may be more competitive out of India) etc. The other part M - management is where we desire consistency between statements and action, proper timely execution of articulated strategy with a high level of governance and lastly the V - valuation i.e. there has to be a relation between price (we pay) and the value (we get).

Q3. Smart beta strategies are gaining ground as investors seek a middle path between passive and active investing. How do you view the growth of smart beta in India, and can factor-based strategies consistently add value across market cycles compared to traditional active and passive approaches?

Ans: These are interesting alternatives to broaden the choices available to investors. Some of these categories are quite nascent so one could see some build-up of assets in the near future. However, they have their own pros and cons. On the positive side, they may be a little cheaper and also they do eliminate some human biases. On the negative side, typical strategies like momentum or quality etc. do not work across all time frames and it may be more appropriate for an astute investor to keep shuffling across such styles. A less involved investor may prefer a professional to take the calls through active management. Long term investors may also find it cumbersome to constantly shuffle styles and suffer tax leakages if their intent is to reap benefits of long-term investing.

Q4. With the launch of multiple strategies in the newly introduced SIF space, how should investors understand the role of these products within their portfolios? What type of investors are best suited for SIF strategies, and how different are they from traditional mutual fund offerings?

Ans: The SIFs are a new category of mutual fund strategies that are available to investors within the broader MF platform. The investment strategies of the funds utilize the same asset classes and securities as traditional mutual funds - Equity, Fixed Income, Commodities, InVITs, etc. The key differentiator being the manner in which these varied asset classes and instruments ( including derivatives) are used to run the investment strategy for these funds. Investors should evaluate their risk appetite, map out their investment and financial needs and then consider investment choices that would help them achieve these needs. The SIFs tend to run relatively more complex strategies than mutual fund schemes, and for many of the strategies, may have higher risk portfolios. Therefore, investors would be well guided to choose funds based on their risk appetite and evaluate individual SIF strategies for their suitability in their portfolio.

Q5. Many investors struggle with asset allocation discipline during bull and bear cycles. How should investors decide when to rebalance equity exposure rather than reacting emotionally to market movements? What indicators or life-stage factors should ideally drive such decisions?

Ans: Investors should stick to their asset allocations that have been created based on their risk appetite, time horizon and investment needs. Bull and Bear cycles are a normal part of the capital markets and difficult to predict and therefore even more difficult to time investments in accordance with these cycles. We believe investors should review their portfolios on a regular basis and re-balance only if required, based on their needs and risk appetites. It is difficult, but investors should actively try to ignore relatively short-term market movements and stay disciplined and focused on their needs.

Q6. While digital platforms have made investing more accessible, data indicates that investors working with MFDs tend to stay invested longer through market cycles. Do you believe the role of distributors is evolving from product distribution toward behavioural coaching and financial discipline?

Ans: Mutual Fund Distributors are an integral part of the Mutual Fund ecosystem. Financial decisions for most of the populace are a daunting and esoteric activity and therefore most investors require handholding for both the actual investment decisions as well as guidance through the process of executing those investment decisions. As the market grows, evolves and matures, we see distributors playing more active roles in their investors’ investment life cycles. The resilience of SIPs and Mutual Fund flows despite market volatility has clearly shown that the increasing education and emphasis on disciplined investing, staying the course through market cycles and aligning asset allocation to risk appetites is beginning to make an impact on the broader investing population. MFDs have been instrumental in this growth and understanding of investments.

Source: Internal Research
Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

Mr. Puneet Pal

Head - Fixed Income, PGIM Mutual Fund.

Puneet Pal is the Head-Fixed Income of PGIM India Asset Management Pvt. Ltd. He has over 23+ years of experience in the debt markets within the mutual fund space.

In his last assignment, Puneet was Head - Fixed Income at BNP Paribas Asset Management India Pvt. Ltd. Prior to that Puneet was Sr. Vice President & Fund Manager at UTI Asset Management Company Ltd. He has also worked as Fund Manager at Tata Asset Management Ltd. He is a MBA (Finance) from Symbiosis Institute of Business Management, Pune.

He jointly manages PGIM India Money Market Fund, PGIM India CRISIL IBX Gilt Index – Apr 2028 Fund, PGIM India Ultra Short Duration Fund, PGIM India Liquid Fund, PGIM India Low Duration Fund, PGIM India Corporate Bond Fund, PGIM India Dynamic Bond Fund and PGIM India Gilt Fund and debt portion of certain equity funds.

Please note we have published the answers as it is received from the Fund Manager of PGIM Mutual Fund.

Q1. With crude oil prices remaining volatile and the RBI maintaining a cautious stance on rates, how do you see the interest rate trajectory evolving in India? What is your broad positioning on duration and the yield curve in this environment?

Ans: The duration and the extent of the Middle East conflict will be a key determinant of the Inflation and the growth outlook for FY27. Though the Inflation outlook has worsened markedly, we do not expect a rate hike by the MPC in next week’s policy meeting as the current lower Inflation buys some time for the MPC to wait and gauge the impact of the rapidly evolving situation. We expect RBI to sound hawkish with a decent probability of a change in the monetary policy stance, signalling the end of the rate cutting cycle.

Q2. In this uncertain rate environment, how do you decide the balance between accrual and duration strategies within your portfolio? What key triggers or indicators lead you to shift between the two?

Ans: The choice of accrual and duration strategies depend upon various variables , primarily our outlook on the markets and the relative valuations. Our view of the interest rate trajectory is the key trigger for choosing between accrual and duration strategies.

Q3. Debt is often under-appreciated in portfolio construction despite its role in managing risk and providing stability. How should investors determine the appropriate allocation to debt over the long term, and what frameworks or factors should guide this decision?

Ans: Diversification is essential to mitigate risk. An equity-heavy portfolio will suffer a huge drawdown when markets correct. On the other hand, a portfolio having an optimal balance between equity and debt could protect the downside better. As part of the asset allocation process, investors should invest across different asset classes to cut down risk and achieve an optimal balance between risk and reward.

Q4. Liquid funds offer relatively attractive risk-adjusted returns, yet retail participation remains limited. What are the key factors-such as awareness, liquidity perception, or behavioural biases-that are restricting broader adoption, and what could drive a structural shift in investor allocation?

Ans: Lack of awareness , we believe , is the major factor for lower retail participation in Liquid fund and money market categories. More information and educating investors about asset allocation and financial literacy can drive a shift in investor allocation

Q5. Online bond platforms are increasingly attracting retail investors by offering higher-yield opportunities. How do you assess the risk-return trade-off in such instruments, and what key factors should investors evaluate before investing?

Ans: The risk return is adversely skewed for investors investing on such platforms as an individual investor may not be in a position to handle a negative credit event. We believe that investors are better off investing through institutional investment vehicles such as credit funds offered by mutual funds.

If investors want to invest in bonds through online bond platforms , then they should do proper credit evaluation and due diligence in respect of the bonds they are investing in and should also be aware of the operating mechanics of the high yield bond markets.

Q6. External credit ratings may not always capture early signs of stress. What additional internal checks or early warning indicators does your team use when assessing creditworthiness, and how do these help in protecting investor capital?

Ans: Credit Research is an important part of our investment process. We start with a bottom-up process to create an investible universe. Potential opportunities are first subjected to screening to establish a baseline on financials and corporate governance standards. The filtered issuers are then subjected to more rigorous evaluation standards covering both quantitative and qualitative factors. The process includes an internal credit rating and scoring framework as an input for decision making to complement the external rating. Each issue is subject to ongoing review as long as they are part of the investable universe.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Mr. Vinay Paharia

Chief Investment Officer - Equity, PGIM Mutual Fund.

Vinay Paharia joined PGIM India AMC in January 2023 and is currently the Chief Investment Officer at PGIM India Mutual Fund. He has over 22 years of experience in equity market and fund management. He holds M.M.S, BCom and CFA (ICFAI) degrees. Vinay has been a growth investor and has followed a consistent investment philosophy of buying good quality and high growth companies at a reasonable price. This strategy has been an evergreen framework and has outperformed markets most of the times (but not all the time).  His objective is to buy companies that are available at a price that may be slightly lower than the underlying fair value, which presents a greater potential upside over a five-year period. Vinay vouches for a disciplined, evidence-based investment approach over chasing short-term returns.

Please note we have published the answers as it is received from the Fund Manager of PGIM Mutual Fund.

Q1. With India’s valuation premium over other emerging markets moderating and GDP growth expected to remain strong (~6.8% in FY27), how do you assess the current risk-reward for long-term equity investors? Within this backdrop, which segments-large caps, mid caps, or small caps-appear relatively better positioned today from a valuation and earnings growth perspective?

Ans: Last few months have been a macro stress test - combining oil shock, capital outflows, currency pressures, AI related growth pangs and growth downgrades in a short span. However, we believe, many of these being transitory and would resolve itself with passage of time, timelines however are uncertain. More importantly, the above has resulted in a meaningful correction in the markets and much of the froth in valuations which was built has been taken away which is being reflected in the price. Largecaps and Smallcaps are now trading very close to their longer term averages in terms of valuation and risk-reward is much more balanced than before. However, Midcaps are still trading at moderately rich valuations and are hence less preferred compared to large caps and small caps. We believe, it is a good time to increase allocation to Indian equities. It is important to remember that timing is very difficult and investing when risk-reward is favorable is likely to be more fruitful. More importantly, the risk-reward is highly favorable for high growth and good quality business, wherein valuation as well as earnings growth both are in favor for long term investing.

Q2. With passive AUM continuing to rise in India, where do you believe active management can still consistently generate alpha? Are there specific market segments or conditions-such as higher dispersion or volatility-where active strategies have a clear edge over passive?

Ans: Active management's fundamental premise remains robust: markets are not completely efficient, and skilled managers can exploit these inefficiencies to generate risk-adjusted returns above benchmark indices. The strengths of active investing include:

1. Alpha Generation Potential: Skilled active managers can capitalize on market inefficiencies, behavioural biases, and information asymmetries that passive strategies cannot exploit. During periods of significant market stress or structural changes, active managers can potentially protect capital and identify opportunities thereby generating alpha.

2. Risk Management Flexibility: Active managers possess the ability to adjust portfolio risk dynamically, reducing exposure during periods of heightened volatility or when valuations appear stretched. This tactical flexibility can be particularly valuable during market transitions that indices cannot anticipate.

3. Access to Unique Opportunities: Active strategies can invest in securities or sectors before they enter major indices, potentially capturing returns during the inclusion process. They can also avoid or underweight deteriorating companies that indices must hold until they are removed.

We expect polarized performance from the markets. We expect high growth and high quality buckets to outperform while the low growth/quality bucket to underperform and give away the excesses which were built in FY24. Passive investing means there is some degree of exposure to low growth and low quality stocks as they make up a significant portion of Indexes. Active investing ensures conviction and exposure largely to high growth and high quality stocks.

Q3. As we approach the upcoming earnings season, what is your outlook on corporate earnings growth? Which sectors or themes are likely to drive the next phase of market performance, and where do you see the key downside risks?

Ans: We think we are once again likely to witness an earnings impact like that in the pandemic period. In March 2020 to June 2020 quarter (the first quarter of pandemic), we witnessed massive cuts in Nifty 50 Index 1-year forward earnings expectation, from a growth in double digits (in line with historical performance) to an almost 15% decline. However, once again, this is only likely to be transient (like the pandemic) and not structural. Hence we do not expect a material long term structural impact on the macroeconomic environment. The actual earnings compounded at 15% per annum from March 2020 to March 2026, highlighting the transient impact of the pandemic. We feel the longer term earnings trajectory is unlikely to be impacted even this time, with only a short term transient impact likely due to the current geo political environment. Even a massive cut in short-term earnings can only have a small impact on overall Fair Values of companies. This is because equities are growing annuities valued till perpetuity.

Overall fabric of the market constructive for growth + quality investing for the long term. Preferred sector plays are more domestic oriented – Consumption, Domestic financials, India Healthcare, Telecom. Cautious/Negative on I.T, deep cyclicals, Energy and Utilities

Q4. SIP inflows have remained resilient, touching record highs even during volatile phases. Do you see this as a structural shift in investor behaviour? During market corrections, would you advise investors to maintain, increase, or rebalance SIP allocations-and what factors should guide that decision?

Ans: Investment decisions are shaped not only by returns or market data, but also by individual behaviour. Risk tolerance, time horizon, and emotional responses play a significant role in how investors act, especially during volatile markets. We advise investors to maintain staggered investments for all segments of the market.

Periods of geopolitical uncertainty, such as the conflict unfolding today, often lead to higher market volatility and heightened investor reactions. It is common for investors to consider redeeming investments prematurely, trying to time the market, or pausing allocation decisions altogether. While these responses are natural, history shows that emotionally driven decisions

often work against long-term financial goals. Our internal study of Nifty 500 TRI shows that investors who stayed invested 04-Sep-2001 to 31-Dec-2025) during this period, earned 17.33% return while investors who missed the best 20 days ended up earning just 11.06%. This means that investor who stayed invested, (assuming a lumpsum investment of 1 lakh), made Rs 48.77 lakh at the end of 24.32 years. The investor who missed 20 days accumulated Rs 12.82 lakh, a difference of (Rs-35.95 lakh).

Q5. Many investors chase recent outperformers, especially in mid- and small-cap funds, often misaligning with their true risk appetite. What framework would you recommend for selecting equity funds and ensuring portfolios remain aligned with risk tolerance? How can investors stay disciplined through market cycles?

Ans: We have been strong proponents of Growth Investing in India. Our definition of Growth Investing is as follows:

"Investing in a well-diversified portfolio of companies that demonstrate above average growth in business, while generating above average return on equity, purchased at a reasonable price"

Growth investing is all about buying good businesses at fair price. Returns for growth investors are largely driven by earnings growth. Growth investors do not bet on valuation re-rating, but on fair value growth. India is one of the fastest growing large economies in the world. Thus, we have a higher probability of finding superior growth companies in India. We have a large number of companies generating higher than their cost of equity, thereby creating superior shareholder value. We have also witnessed IPOs of a large number of good quality and high growth new age businesses in Indian bourses. Indian companies on average have generated a healthy return on equity (RoE) while growing at a reasonable pace. Over the Long term (two decade) average RoE generated by Top 500 companies in India is 15%. Similarly, long term average sales growth has been 12% for the same set.

We tend to be overweight on the Consumer Discretionary and Healthcare Sectors, as the stocks within these sectors align with our investment philosophy.

Q6. What are the non-negotiable factors your team looks for when selecting stocks? Specifically, how do you evaluate management quality and governance to ensure businesses can sustain performance across cycles?

Ans: Our framework excludes low-growth and low-quality stocks, and it is applicable on all sectors.

Our evaluation of management quality is in conjunction with the quantitative measures stated above and promoter background checks, as well as internal risk triggers. We also take a holistic view from the Fixed Income Team on rating wherever applicable and relevant

Source: Internal Research

Mutual fund investments are subject to market risks, read all scheme-related documents carefully.