Large private banks worth buying, avoid IT for now: Bajaj AMC’s Nimesh Chandan

Nimesh Chandan, Chief Investment Officer at Bajaj Asset Management favours large private banks over non-banking financial companies (NBFCs) and prefers to avoid the information technology sector until growth visibility improves.

While IT valuations have dropped to levels offering attractive dividend yields, the recent bounce may be short-lived due to narrowing top-end guidance from industry majors.

“The bad news is in the price,” Chandan noted regarding the IT pack, adding that a sharp upward rerating is unlikely without clarity on growth. Short-term broader market flows remain heavily dictated by crude oil prices, which are spilling over into raw material inflation and pressuring gross margins.

A clearer direction on crude is expected after the United States midterm elections.

Within the financial space, large private banks offer attractive growth, asset quality and valuations, alongside an absolute year-on-year decline in slippages. Conversely, Bajaj Asset Management remains selective on NBFCs, including gold loan providers.

Pockets of stress in rural and drought-hit areas, combined with falling gold prices, have raised concerns about potential non-performing assets. “This gives us a lot of comfort being there and hence maybe some of these NBFCs where we are seeing some short-term issues we are staying away from at this point of time,” the CIO explained.

The broader market has split into a barbell structure, with small caps delivering strong growth and large caps offering appealing valuations. At least 50% of tracked small-cap companies have beaten earnings estimates, with another 25% to 30% meeting expectations.

To capture this dynamic, the firm’s Flexicap fund has been adding digital consumer, platform and quick commerce companies during recent market falls. These businesses are delivering positive numbers ahead of the festive season. Their ability to pass on commodity cost increases will depend on brand strength and supply chain moats, while automobile companies have already performed slightly better than expected despite cost pressures.

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Buy large private banks, avoid IT for now: Bajaj AMC’s Nimesh Chandan

Capital market infrastructure companies—such as exchanges and depositories—represent a mega trend currently trading at attractive valuations following a sentiment-driven correction. Regulatory changes and volume concerns have weighed on the segment, but growth and volumes are expected to recover over the next few months. The asset manager is actively accumulating these stocks, though an immediate upmove is not anticipated. Additionally, a potential cut in the long-term capital gains tax would serve as a positive catalyst, as the street has not fully priced in the marginal gains from such a move.

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