Chandan said recent movements in oil prices suggested markets had already begun factoring in the possibility of a peace agreement, with investors responding positively to signs of easing tensions.
He believes the improving macro backdrop is directing attention back to long-term growth trends and attractive valuations across several sectors.
The fund house remains optimistic on the broader economy and prefers cyclical sectors. Financials, industrials and materials are among its key themes, while healthcare, pharmaceuticals, consumer discretionary companies and digital commerce businesses also continue to find favour.
“We like everything except IT for now,” he added.
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Chandan, expects financial stocks to spearhead the next leg of the market rally, helped by their heavy weightage in benchmark indices and the likelihood of incremental passive inflows.
He believes valuations across the sector remain attractive and sees ample opportunities within financials, with private banks and non-banking finance companies (NBFCs) emerging as the preferred bets.
On gold-related businesses, Chandan said the correction in the sector has opened up opportunities in some gold financing companies, although the fund house is relatively less enthusiastic about jewellery stocks.
While Bajaj Finserv AMC has been positive on the power sector for several years, it has turned more cautious because of expensive valuations. Chandan warned that many stocks are now pricing in growth assumptions far into the future, making them vulnerable to any disappointment in execution or earnings.
He noted that project-based businesses often experience uneven quarterly performance, which could increase volatility.
The fund house has also shifted towards companies with strong physical assets and predictable cash flows. Materials, real estate, power, ports and airport-related businesses have emerged as attractive themes as valuations and replacement costs continue to support their investment case.
For the entire discussion, watch the accompanying video
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