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.