Mr. Puneet Pal

Head - Fixed Income, PGIM Mutual Fund.

Puneet Pal is the Head-Fixed Income of PGIM India Asset Management Pvt. Ltd. He has over 23+ years of experience in the debt markets within the mutual fund space.

In his last assignment, Puneet was Head - Fixed Income at BNP Paribas Asset Management India Pvt. Ltd. Prior to that Puneet was Sr. Vice President & Fund Manager at UTI Asset Management Company Ltd. He has also worked as Fund Manager at Tata Asset Management Ltd. He is a MBA (Finance) from Symbiosis Institute of Business Management, Pune.

He jointly manages PGIM India Money Market Fund, PGIM India CRISIL IBX Gilt Index – Apr 2028 Fund, PGIM India Ultra Short Duration Fund, PGIM India Liquid Fund, PGIM India Low Duration Fund, PGIM India Corporate Bond Fund, PGIM India Dynamic Bond Fund and PGIM India Gilt Fund and debt portion of certain equity funds.

Please note we have published the answers as it is received from the Fund Manager of PGIM Mutual Fund.

Q1. With crude oil prices remaining volatile and the RBI maintaining a cautious stance on rates, how do you see the interest rate trajectory evolving in India? What is your broad positioning on duration and the yield curve in this environment?

Ans: The duration and the extent of the Middle East conflict will be a key determinant of the Inflation and the growth outlook for FY27. Though the Inflation outlook has worsened markedly, we do not expect a rate hike by the MPC in next week’s policy meeting as the current lower Inflation buys some time for the MPC to wait and gauge the impact of the rapidly evolving situation. We expect RBI to sound hawkish with a decent probability of a change in the monetary policy stance, signalling the end of the rate cutting cycle.

Q2. In this uncertain rate environment, how do you decide the balance between accrual and duration strategies within your portfolio? What key triggers or indicators lead you to shift between the two?

Ans: The choice of accrual and duration strategies depend upon various variables , primarily our outlook on the markets and the relative valuations. Our view of the interest rate trajectory is the key trigger for choosing between accrual and duration strategies.

Q3. Debt is often under-appreciated in portfolio construction despite its role in managing risk and providing stability. How should investors determine the appropriate allocation to debt over the long term, and what frameworks or factors should guide this decision?

Ans: Diversification is essential to mitigate risk. An equity-heavy portfolio will suffer a huge drawdown when markets correct. On the other hand, a portfolio having an optimal balance between equity and debt could protect the downside better. As part of the asset allocation process, investors should invest across different asset classes to cut down risk and achieve an optimal balance between risk and reward.

Q4. Liquid funds offer relatively attractive risk-adjusted returns, yet retail participation remains limited. What are the key factors-such as awareness, liquidity perception, or behavioural biases-that are restricting broader adoption, and what could drive a structural shift in investor allocation?

Ans: Lack of awareness , we believe , is the major factor for lower retail participation in Liquid fund and money market categories. More information and educating investors about asset allocation and financial literacy can drive a shift in investor allocation

Q5. Online bond platforms are increasingly attracting retail investors by offering higher-yield opportunities. How do you assess the risk-return trade-off in such instruments, and what key factors should investors evaluate before investing?

Ans: The risk return is adversely skewed for investors investing on such platforms as an individual investor may not be in a position to handle a negative credit event. We believe that investors are better off investing through institutional investment vehicles such as credit funds offered by mutual funds.

If investors want to invest in bonds through online bond platforms , then they should do proper credit evaluation and due diligence in respect of the bonds they are investing in and should also be aware of the operating mechanics of the high yield bond markets.

Q6. External credit ratings may not always capture early signs of stress. What additional internal checks or early warning indicators does your team use when assessing creditworthiness, and how do these help in protecting investor capital?

Ans: Credit Research is an important part of our investment process. We start with a bottom-up process to create an investible universe. Potential opportunities are first subjected to screening to establish a baseline on financials and corporate governance standards. The filtered issuers are then subjected to more rigorous evaluation standards covering both quantitative and qualitative factors. The process includes an internal credit rating and scoring framework as an input for decision making to complement the external rating. Each issue is subject to ongoing review as long as they are part of the investable universe.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Mr. Vinay Paharia

Chief Investment Officer - Equity, PGIM Mutual Fund.

Vinay Paharia joined PGIM India AMC in January 2023 and is currently the Chief Investment Officer at PGIM India Mutual Fund. He has over 22 years of experience in equity market and fund management. He holds M.M.S, BCom and CFA (ICFAI) degrees. Vinay has been a growth investor and has followed a consistent investment philosophy of buying good quality and high growth companies at a reasonable price. This strategy has been an evergreen framework and has outperformed markets most of the times (but not all the time).  His objective is to buy companies that are available at a price that may be slightly lower than the underlying fair value, which presents a greater potential upside over a five-year period. Vinay vouches for a disciplined, evidence-based investment approach over chasing short-term returns.

Please note we have published the answers as it is received from the Fund Manager of PGIM Mutual Fund.

Q1. With India’s valuation premium over other emerging markets moderating and GDP growth expected to remain strong (~6.8% in FY27), how do you assess the current risk-reward for long-term equity investors? Within this backdrop, which segments-large caps, mid caps, or small caps-appear relatively better positioned today from a valuation and earnings growth perspective?

Ans: Last few months have been a macro stress test - combining oil shock, capital outflows, currency pressures, AI related growth pangs and growth downgrades in a short span. However, we believe, many of these being transitory and would resolve itself with passage of time, timelines however are uncertain. More importantly, the above has resulted in a meaningful correction in the markets and much of the froth in valuations which was built has been taken away which is being reflected in the price. Largecaps and Smallcaps are now trading very close to their longer term averages in terms of valuation and risk-reward is much more balanced than before. However, Midcaps are still trading at moderately rich valuations and are hence less preferred compared to large caps and small caps. We believe, it is a good time to increase allocation to Indian equities. It is important to remember that timing is very difficult and investing when risk-reward is favorable is likely to be more fruitful. More importantly, the risk-reward is highly favorable for high growth and good quality business, wherein valuation as well as earnings growth both are in favor for long term investing.

Q2. With passive AUM continuing to rise in India, where do you believe active management can still consistently generate alpha? Are there specific market segments or conditions-such as higher dispersion or volatility-where active strategies have a clear edge over passive?

Ans: Active management's fundamental premise remains robust: markets are not completely efficient, and skilled managers can exploit these inefficiencies to generate risk-adjusted returns above benchmark indices. The strengths of active investing include:

1. Alpha Generation Potential: Skilled active managers can capitalize on market inefficiencies, behavioural biases, and information asymmetries that passive strategies cannot exploit. During periods of significant market stress or structural changes, active managers can potentially protect capital and identify opportunities thereby generating alpha.

2. Risk Management Flexibility: Active managers possess the ability to adjust portfolio risk dynamically, reducing exposure during periods of heightened volatility or when valuations appear stretched. This tactical flexibility can be particularly valuable during market transitions that indices cannot anticipate.

3. Access to Unique Opportunities: Active strategies can invest in securities or sectors before they enter major indices, potentially capturing returns during the inclusion process. They can also avoid or underweight deteriorating companies that indices must hold until they are removed.

We expect polarized performance from the markets. We expect high growth and high quality buckets to outperform while the low growth/quality bucket to underperform and give away the excesses which were built in FY24. Passive investing means there is some degree of exposure to low growth and low quality stocks as they make up a significant portion of Indexes. Active investing ensures conviction and exposure largely to high growth and high quality stocks.

Q3. As we approach the upcoming earnings season, what is your outlook on corporate earnings growth? Which sectors or themes are likely to drive the next phase of market performance, and where do you see the key downside risks?

Ans: We think we are once again likely to witness an earnings impact like that in the pandemic period. In March 2020 to June 2020 quarter (the first quarter of pandemic), we witnessed massive cuts in Nifty 50 Index 1-year forward earnings expectation, from a growth in double digits (in line with historical performance) to an almost 15% decline. However, once again, this is only likely to be transient (like the pandemic) and not structural. Hence we do not expect a material long term structural impact on the macroeconomic environment. The actual earnings compounded at 15% per annum from March 2020 to March 2026, highlighting the transient impact of the pandemic. We feel the longer term earnings trajectory is unlikely to be impacted even this time, with only a short term transient impact likely due to the current geo political environment. Even a massive cut in short-term earnings can only have a small impact on overall Fair Values of companies. This is because equities are growing annuities valued till perpetuity.

Overall fabric of the market constructive for growth + quality investing for the long term. Preferred sector plays are more domestic oriented – Consumption, Domestic financials, India Healthcare, Telecom. Cautious/Negative on I.T, deep cyclicals, Energy and Utilities

Q4. SIP inflows have remained resilient, touching record highs even during volatile phases. Do you see this as a structural shift in investor behaviour? During market corrections, would you advise investors to maintain, increase, or rebalance SIP allocations-and what factors should guide that decision?

Ans: Investment decisions are shaped not only by returns or market data, but also by individual behaviour. Risk tolerance, time horizon, and emotional responses play a significant role in how investors act, especially during volatile markets. We advise investors to maintain staggered investments for all segments of the market.

Periods of geopolitical uncertainty, such as the conflict unfolding today, often lead to higher market volatility and heightened investor reactions. It is common for investors to consider redeeming investments prematurely, trying to time the market, or pausing allocation decisions altogether. While these responses are natural, history shows that emotionally driven decisions

often work against long-term financial goals. Our internal study of Nifty 500 TRI shows that investors who stayed invested 04-Sep-2001 to 31-Dec-2025) during this period, earned 17.33% return while investors who missed the best 20 days ended up earning just 11.06%. This means that investor who stayed invested, (assuming a lumpsum investment of 1 lakh), made Rs 48.77 lakh at the end of 24.32 years. The investor who missed 20 days accumulated Rs 12.82 lakh, a difference of (Rs-35.95 lakh).

Q5. Many investors chase recent outperformers, especially in mid- and small-cap funds, often misaligning with their true risk appetite. What framework would you recommend for selecting equity funds and ensuring portfolios remain aligned with risk tolerance? How can investors stay disciplined through market cycles?

Ans: We have been strong proponents of Growth Investing in India. Our definition of Growth Investing is as follows:

"Investing in a well-diversified portfolio of companies that demonstrate above average growth in business, while generating above average return on equity, purchased at a reasonable price"

Growth investing is all about buying good businesses at fair price. Returns for growth investors are largely driven by earnings growth. Growth investors do not bet on valuation re-rating, but on fair value growth. India is one of the fastest growing large economies in the world. Thus, we have a higher probability of finding superior growth companies in India. We have a large number of companies generating higher than their cost of equity, thereby creating superior shareholder value. We have also witnessed IPOs of a large number of good quality and high growth new age businesses in Indian bourses. Indian companies on average have generated a healthy return on equity (RoE) while growing at a reasonable pace. Over the Long term (two decade) average RoE generated by Top 500 companies in India is 15%. Similarly, long term average sales growth has been 12% for the same set.

We tend to be overweight on the Consumer Discretionary and Healthcare Sectors, as the stocks within these sectors align with our investment philosophy.

Q6. What are the non-negotiable factors your team looks for when selecting stocks? Specifically, how do you evaluate management quality and governance to ensure businesses can sustain performance across cycles?

Ans: Our framework excludes low-growth and low-quality stocks, and it is applicable on all sectors.

Our evaluation of management quality is in conjunction with the quantitative measures stated above and promoter background checks, as well as internal risk triggers. We also take a holistic view from the Fixed Income Team on rating wherever applicable and relevant

Source: Internal Research

Mutual fund investments are subject to market risks, read all scheme-related documents carefully.

Mr. Venugopal Manghat

Chief Investment Officer - Equity, HSBC Mutual Fund.

Venugopal Manghat is the Chief Investment Officer (CIO) - Equity of HSBC Mutual Fund. Venugopal was previously Head - Equity Investments, L&T Investment Management Limited from May 2016 to Nov 2022 and was Co-Head - Equity Investments, L&T Investment Management Limited from Apr 2012 - Apr 2016. Prior to 2012, he was Co-Head - Equities, Tata Asset Management Limited, India from 1995 - 2012. His educational qualification is MBA Finance, B.SC.

Please note we have published the answers as it is received from the Fund Manager of HSBC Mutual Fund.

Q1. Recent geopolitical tensions in the Middle East have once again raised concerns around global market volatility. From the perspective of Indian equities, do such events generally result in only short-term market disruptions, or can they have any lasting implications for the long-term outlook of the Indian economy and markets?

Ans:1 Indian markets have historically "climbed the wall of worry" through a wide range of internal and external concerns such as wars, commodity spikes, tech bubble, Global Financial Crisis, and Covid. Such events often result in market corrections in the near term, but markets recover as fundamentals reassert themselves.

Importantly, periods like these tend to separate the 'wheat from the chaff'. High-quality companies, i.e., those with strong balance sheets, disciplined capital allocation, resilient business models, and credible management teams, often use volatility to consolidate market share, strengthen stakeholder relationships, and emerge in a better competitive position once conditions normalise.

From a longer-term perspective, we believe India is better placed today to absorb external shocks than it was in prior cycles. Over the past decade-plus, a series of reforms and institutional strengthening across sectors has helped build a more durable foundation.

So, while near-term market moves can be sharp and sentiment-driven, we don't see such episodes, by themselves, changing the long-term trajectory of the Indian economy or the structural trend in equities.

Q2. After a prolonged phase of FII outflows, February witnessed the highest foreign inflows into Indian equities in nearly 17 months. Do you believe this signals a more sustained improvement in global investor sentiment toward India, or could such inflows remain intermittent in the near term?

Ans:2 Foreign investor positioning in India is typically driven by a combination of India-specific fundamentals and the broader global/emerging market opportunity set.

A key reason India saw meaningful outflows over the past year was the global concentration of returns in the AI theme. Markets such as US, Taiwan, Korea and parts of China have a larger share of direct AI beneficiaries, whereas India has fewer "pure-play" AI winners in the listed space. Currency dynamics also mattered. At the same time, India's earnings growth expectations softened versus its long-term trend.

Looking ahead, consensus expects earnings to re-accelerate to mid-teens growth in FY27E from single-digit growth over past two years. Valuations have also become more reasonable with India's valuation premium to MSCI EM moderating closer to long-term averages. Finally, FII positioning is light with India's active weight relative to the EM index near multi-decade lows. All these can create durable improvement in positioning with strong incremental inflows.

Net-net, while February's strong inflows are encouraging, we'd expect the near-term pattern to remain somewhat stop-start, with flows reacting to global risk appetite, geopolitics, US dollar, and relative performance across markets. We expect FII positioning to improve over the medium term.

Q3. The IT sector has witnessed a sharp correction recently, with the index declining by nearly 20%, partly driven by concerns around evolving technologies such as artificial intelligence and their potential impact on traditional IT services. From a long-term perspective, how do you evaluate these developments and the future growth prospects of the Indian IT sector?

Ans:3 The recent correction in Indian IT has been sharp with >20% drawdown during YTD2026.

From a top-down lens, the sector is facing genuine headwinds as AI systems become more capable moving from "assistive" tools to autonomous agents. This uncertainty is likely to stay elevated over the next few quarters as technology and adoption curve evolves quickly. However, the bottom-up picture is more balanced. Many IT companies delivered in-line to better-than-expected 3QFY26 results, with healthy deal wins and management commentary that remains broadly constructive.

Over the medium term, we see AI as both a disruptor and a growth driver. On one hand, it can compress some legacy work through automation and productivity gains. On the other, it can expand the addressable market as enterprises push into "agentification" (embedding AI agents across workflows). Though valuations have reset closer to long-term multiples, in the near term, continued developments in Agentic AI could keep sentiment and valuations subdued.

Ultimately, the key long-term question is whether AI meaningfully lowers the sector's terminal growth rate and if so, by how much. The answer to that, relative to the valuation investors are paying today, will determine whether this correction proves to be a temporary derating or a more lasting reset.

Q4. The recent regulatory changes introduced by SEBI allow equity schemes to allocate a limited portion of assets to commodities such as gold and silver through ETFs. How do you view this flexibility from a portfolio construction perspective, and do you see it meaningfully influencing diversification within equity-oriented funds?

Ans:4 SEBI's recent move to allow equity mutual funds greater flexibility permitting allocation of up to 35% to instruments such as gold and silver (via ETFs), as well as InvITs and debt broadly expands the options available to fund managers. This gives managers additional levers to manage liquidity, drawdowns and diversification, particularly during periods when equity risk premium increases.

That said, in our view, the most important principle is that an equity scheme should remain true to its stated mandate and investor expectations. For example, a small-cap fund is typically chosen to participate in India's growth story through smaller companies that can scale over time. If such a fund were to meaningfully increase exposure to gold or debt, it could dilute the very equity participation investors signed up for.

As a fund house, we maintain cash primarily to meet redemption needs and don't take large active cash calls. Similarly, while a small allocation to gold/silver ETFs or other permitted instruments can provide incremental diversification, it's unlikely in our funds to become a meaningful portion of equity portfolios.

Overall, the change is a positive, but whether it materially changes diversification within equity schemes will depend on each fund's philosophy.

Q5. Markets periodically witness events that can trigger short-term volatility. Given that such events are a recurring feature of markets, how should investors approach these phases so that they view them as opportunities rather than panic and remain focused on long-term wealth building?

Ans:5 Over the past four decades, two things have remained remarkably constant - Equities have been volatile in the short term, and they've tended to outperform most other asset classes over the long term. In the short run, every volatile event feels different and permanent, however, most have been temporary within a longer compounding journey.

The most practical way for investors to turn volatility into opportunity is to shift towards a process-oriented approach to equity investing rather than reacting to daily news flow. Use systematic investing through SIPs/ STPs and staggered deployment to help manage volatility. During such volatile periods, strong businesses with resilient balance sheets and cash flows tend to recover faster and compound better. Investors should maintain adequate liquidity so that short-term market moves don't result in forced selling and become permanent losses.

Empirical evidence suggests that some of the best long-term returns are earned by investing when sentiment is weakest. To conclude, volatility creates uncomfortable moments, but it also creates better entry points for long-term wealth building.

Q6. It is often observed that investors gravitate toward schemes that have delivered strong recent performance and may even switch funds based on short-term rankings. In your view, how should investors approach fund selection and avoid the common behavioural trap of chasing past performance?

Ans:6 Styles, sectors and market caps rotate as macro conditions change. So what worked for a fund in one phase may not work in the next. A fund that tops the charts in a momentum-led rally may lag when leadership shifts to value, quality, or defensives. If investors focus on only one element (typically recent returns) and switch schemes based on short-term rankings, the outcome is often sub-optimal.

A better approach is to evaluate whether a fund's investment philosophy and process fits the investor's needs. Practically, investors should look at:

Consistency across market cycles, rather than just short-term returns

Risk-adjusted performance and not only absolute performance

Portfolio construction discipline (diversification, concentration, turnover)

Fund house and portfolio manager process (stability in investment approach)

Costs and tax efficiency

In short, investors are better served by choosing funds with a clear, well-executed process aligned to their needs and then giving that process time to work rather than switching based on recent rankings.

Source: Internal Research

Mutual fund investments are subject to market risks, read all scheme-related documents carefully.