At a time when markets swing between optimism and caution, and macro headlines jostle for investor attention, Shridatta Bhandwaldar, Head of Equities at Canara Robeco Asset Management Company Limited (CRAMC), remains firmly anchored to the fundamentals.

With over two decades of experience in the investment landscape, Bhandwaldar brings a sharp focus on long-term wealth creation through deep, bottom-up stock picking and disciplined asset allocation. In this exclusive conversation with Fortune India, he discusses the philosophy driving CRAMC’s equity strategy, why large caps are coming back into favour, and how investors can weather volatility with a measured, multi-asset approach.

He also shares why launching an asset allocation fund now is about long-term investor discipline, not market timing.

Edited excerpts:

How would you describe your investment philosophy?

Our equity investment philosophy rests on one core belief: companies (underlying businesses), and not the focus on short-term stock prices, generate lasting wealth. We focus on long-term risk-adjusted wealth creation and tend to look past short-term noise in the marketplace. Our investment objective is to invest in robust growth-oriented businesses, run by competent management at a reasonable valuation. The goal is also to identify catalysts for medium-term earnings and capital efficiency deviations that will reignite earnings growth and re-rating of the businesses. These catalysts may be specific to the company or affect the entire industry. We believe that patient capital, coupled with deep fundamental analysis, yields superior long-term returns.

What kind of funds do you believe will work in the volatile times we are wading through?

Based on earnings growth valuation context, relatively, we are more constructive on defensive categories like Large Cap, Flexicap, Consumption, Balance Advantage, Multi-asset, etc. Large caps have come back to fair valuation of 18x 1-yr consensus fwd earnings, whereas the broader market continues to be between 22-25x 1-yr fwd consensus earnings, which is still higher than historical valuations.

You are launching an asset allocation fund now. Isn't it too late, given most assets are at their peak of return cycle (debt, gold, etc.)? How would you justify the timing?

Our product launch is based on long-term view on potential category value addition to customers rather than short-term view on any particular asset class. This is a product that we believe is a requirement of Indian households, since asset allocation is paid less attention than required. The majority of household savings are sitting in fixed deposits and real estate as of now. Asset allocation product helps investors outsource this job of asset allocation to professional portfolio managers and Asset Management Companies (AMC). Besides, an asset allocation product can have less allocation if a particular asset class is less attractive than the others within equity, debt and precious metals.   

As an asset allocator, how would you invest Rs 1 lakh in the current scenario?

We would be conservative and allocate it to a multi-asset kind of product where the optimal asset allocation can be decided by the CRAMC.

There is a lot of hope for large caps to perform during the current year. Do you concur? Why?

Large caps are expected to deliver 12-14% earnings CAGR over FY25- 27. In this context, the valuations of 18xFY27 consensus earnings are attractive from a 18- 24 months perspective.

How do you see the market panning out ahead? We are seeing volatile moves, but the market seems to have stabilised a bit. Do you believe we can see a rally or a consolidation here onwards?

We expect the market to be volatile and likely to consolidate for some more time. This year is likely to be a bottom-up stock picking market, until corporate earnings move back to double dight YoY growth, tariff-related issues resolve and India–Pak conflict dials down.

What is the cash holding at Canara Robeco? Do you believe in keeping powders dry or going all in?

We don’t believe in holding too much cash, once investors have allocated funds. We typically have 2-5% cash across our funds.

Despite a lot of positivity about MFs, most of them fail to beat the benchmark in the long term. Why is beating the benchmark difficult for most fund managers?

Looking at point-to-point data during the bullish cycle can be fraught with (the risk of) leading to wrong conclusions. I would suggest that investors should focus on rolling 3/5/7/10-year returns along with standard deviation and beta of the portfolio. That will give a complete picture of the performance of the scheme.

Canara Robeco is not present in ETF segment. Is there any plan to start an ETF/index fund, given the segment has grown rapidly in recent years?
There are no immediate plans to look at some of these products, given the possible scalability of existing actively managed schemes for Canara Robeco.

All data sources: Bloomberg