Shridatta Bhandwaldar, Chief Investment Officer-Equities at Canara Robeco AMC, has emphasized the critical role of government spending in the current economic environment, urging policymakers to avoid aggressive fiscal tightening. With demand remaining weak, private capital expenditure subdued, and household incomes showing limited growth, government expenditure becomes a crucial economic lever.
Company Performance and Market Position
Canara Robeco AMC has demonstrated steady growth following its 2025 listing, maintaining its market position while expanding its product offerings. The company's equity portfolio now comprises 14 equity-oriented products, with most core-category new fund offers completed.
| Asset Category |
Amount (₹ crore) |
| Domestic Equity AUM |
1,10,000 |
| Offshore Assets |
16,000-17,000 |
| Total Equity AUM/Advisory |
1,25,000-1,26,000 |
The transition to a listed entity has introduced additional accountability layers, increased regulatory scrutiny, and closer investor monitoring, marking a significant operational shift for the asset management company.
Market Outlook and Valuation Dynamics
Bhandwaldar anticipates improved market conditions in 2026, citing three key positive developments. First, earnings appear to be bottoming out with downgrades largely ceasing, while large-cap valuations have reached fair levels, attracting foreign institutional investor interest. Second, India's emerging market valuation premium has normalized to 45-50% from nearly 80%. Third, tariff concerns may ease while government measures including GST support, corporate tax cuts, and state welfare programs boost consumption.
The market experienced significant capital flow shifts over the past 12-15 months, with foreign institutional investors withdrawing approximately $17-18 billion while domestic inflows reached around $80 billion. India's valuation-earnings context appeared less attractive compared to markets like Brazil, Korea, and Taiwan, driving global money elsewhere.
Sector Allocation Strategy
The firm maintains strategic overweight and underweight positions across various sectors based on earnings visibility and growth prospects.
Overweight Sectors
| Sector |
Specific Focus Areas |
| Consumer Discretionary |
Auto, retail, platform companies, hotels, aviation, jewellery |
| Pharmaceuticals |
Domestic branded pharma, hospitals, CDMO players |
| Industrials |
Defence, transmission and distribution |
| Financial Services |
Banks, capital market players, selective NBFCs |
Underweight Sectors
The company remains underweight in oil and gas due to regulatory uncertainties, IT services given earnings visibility concerns and AI transition impacts, and metals due to structural challenges. Bhandwaldar notes that metals companies often fail to meet criteria for management quality, return on assets, return on capital employed, cash flow, and governance standards.
Budget Expectations and Policy Outlook
Regarding the upcoming Union Budget, Bhandwaldar maintains limited expectations, noting that budgets historically excite markets but rarely deliver major changes. The previous budget marked a pivot towards consumption and revenue expenditure, and he hopes the current one avoids further tightening. Defence capital expenditure is expected to rise amid current geopolitical realities.
Sector-specific tax changes, particularly in life insurance, have largely been addressed. Mutual fund taxation is unlikely to be altered, as past increases from 10% to 12.5% hurt sentiment without boosting revenues. Any policy tinkering typically occurs during bullish markets, with divestment targets potentially rising to offset lower tax revenue.
Investment Philosophy and Cash Management
The firm typically maintains cash levels within 5-6%, emphasizing that staying invested has historically proven more effective than attempting market timing. Bhandwaldar advocates for a bottom-up approach, focusing on businesses with strong execution, good governance, and effective capital allocation while avoiding companies that fail to generate free cash flow or earn returns above the cost of capital.
The current market environment has shifted from the disproportionate exuberance of 15 months ago to a more sector- and stock-specific landscape, where performance depends on selecting the right sectors rather than market capitalization preferences.
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