Indian markets like a spring, could rally sharply as uncertainties clear

Indian markets today are like a compressed spring and "once uncertainties like tariffs clear, we could see a sharp rally", according to the investment head of Bajaj Finserv Asset Management Co. (AMC).

- Srushti Vaidya & Dipti Sharma

A lot of money shifted to the US last year on tariff worries, with emerging markets, including India, losing flows; and slower earnings and GDP growth exaggerated the move, said Nimesh Chandan, chief investment officer at Bajaj Finserv AMC, which manages equity assets worth ₹27,700 crore as of July.

Chandan said that as uncertainties ease, India isn't much hit by tariffs and domestic demand measures are kicking in. "That sets the stage for money to return."

Edited excerpts: Could you walk us through your INQUBE investment framework, and how you apply it to stock-picking?

When we framed our investment philosophy, we asked: what really generates alpha?

Our philosophy, INQUBE—information, quantitative, behavioural—works like a factory. Whether equities or fixed income, everything goes through these tools to improve outcomes. In equities, we use checklists, journals, and pre-mortems; in fixed income, tools to gauge rates and spreads.

The information edge comes from knowing something earlier or better than others, though today, it's harder and costlier to sustain. The quantitative edge is about processing the same information more effectively through models and tools, though these, too, can be copied. The most enduring is the behavioural edge: understanding biases, avoiding emotional decisions, and taking advantage of crowd sentiment.

How do you look at large, mid and small caps from the perspective of valuation and stock picking?

Market capitalization alone doesn't reveal a company's wealth creation potential. Whether a firm has a market cap of ₹2,000 crore, ₹20,000 crore, or ₹2 lakh crore, you can't predict which will deliver the best returns in five years without looking at the business, management quality, and valuation. A small-cap may look attractive, but if the business isn't strong, size alone won't drive returns.