Large caps look interesting in the current market: CIO of Baroda BNP MF

With over three decades of experience in the financial markets, Sanjay Chawla brings a seasoned perspective on the current investment landscape. The Chief Investment Officer (of equity) at Baroda BNP Paribas Mutual Fund notes that mid- and small-cap "valuations are facing challenges", and during global or domestic earnings slowdowns, "mid and small caps tend to decelerate much faster than the large caps," a trend being observed in the present market. Having been associated with Baroda BNP since 2013, Chawla currently manages six schemes with total assets worth around Rs 11,500 crore, including the four-star-rated Baroda BNP Paribas Balanced Advantage Fund and Baroda BNP Paribas Focused Fund. In this conversation, Chawla delves into his investment philosophy, centred around the BMV (business, management and valuation) approach. He also explains why valuations must align with growth expectations, particularly in mid and small caps, and advises investors to focus on the investment process rather than fixating on performance. Below is the edited transcript. We've seen some corrections recently (in the broader indices). Do you see this as a buying opportunity, or are valuations still too high? We have observed recent market corrections driven by global factors across market capitalisations. Global factors seem to impact earnings across the market curve, particularly in the mid- and small-cap segments. Large caps have been relatively less volatile. The corrections are also due to the slowdown in earnings growth in the first quarter of the current financial year. I anticipate a similar level of tepid growth in the second quarter. While there has been a slight correction, I believe these corrections are temporary. In terms of the overall valuation, I think that markets are trading at the last 10-year average. So, are the earnings growth aligned to that 10-year average? Given the slower-than-expected first-half performance, we may see a bit of an earnings cut in the coming t