'We are bullish on Indian equities but expect volatility to increase'

"Asset allocation in equities should reflect the changes in market conditions. Unfortunately, a lot of investors have misinterpreted this as selling when the market goes up and buying when the market goes down," says Nimesh Chandan, chief investment officer, Bajaj Finserv Mutual Fund.

- Sashind Ningthoukhongjam

The asset management firm was in the news recently for launching a balanced advantage fund (BAF), a type of hybrid mutual fund that invests in a mix of equity and debt securities. The Bajaj Finserv Balanced Advantage Fund is an all-seasons product, which suits a large population of investors, Chandan tells Mint. Edited excerpts from an interview:

Why have you decided to go ahead with a BAF?

A dynamic asset allocation model for a conservative investor has been recommended now for many decades. It was first formally suggested in a book by Benjamin Graham in 1949, when he said that investors should move allocation to equity between 25% and 75% of the portfolio based on market conditions. So, this is really an all-seasons product, which suits a large population of investors. If we come to why we chose to launch it particularly in this period, that’s because we need opportunity both in equity as well as fixed income side. Indian economy is showing robust growth and corporate sector is delivering good numbers. However, there are political and geo-political events that may cause volatility. A balanced advantage fund will use this volatility to generate returns for our investors. On the fixed income side, we believe we are at the peak of interest rates. These are attractive levels to lock-in a good potential yield and seek to enjoy the benefits when the cycle starts turning downwards.

How are you going to allocate between debt and equity?