At the Hubbis India Wealth Management Forum 2026, Mohit Bhatia, Chief Executive Officer of Bank of India Mutual Fund, set out the case for actively managed Indian equities and explained how the fund house approaches the challenge of producing alpha consistently.
His presentation moved from the long-term wealth creation delivered by Indian equities to the parts of the market where active management can still add value. Market returns remain an important foundation for portfolios, Bhatia said, but the opportunity to outperform varies considerably across segments. Research coverage is thinner outside the largest companies, leaving more scope for stock selection to make a difference.
He then walked through Bank of India Mutual Fund’s own investment process, from idea generation and fundamental research through to portfolio construction, validation and exits. Liquidity and concentration controls run alongside the stock-selection process, particularly because the portfolios are open-ended.
Key Takeaways
- Indian Equities Remain A Long-Term Wealth Creator: The Sensex and Nifty 50 compounded at around 14% over the 24 years covered in the presentation, although returns varied substantially between market cycles.
- Alpha Opportunity Is Uneven Across The Market: Bhatia sees large-cap alpha as increasingly difficult, while thinner research coverage further down the market can leave more scope for active stock selection.
- Mutual Funds Retain Structural Advantages: Internal portfolio turnover does not create a capital-gains event for the individual unitholder each time a manager trades, which can make active rebalancing more efficient.
- Research Needs To Be Repeatable: Bank of India Mutual Fund moves from ideation and research through selection, allocation, validation, monitoring and exit discipline within a defined investment process.
- The ‘Rate Of Change’ Is A Core Screener: The team looks for shifts in revenue and profit pools, regulation, sector trends, geopolitics and company-specific developments that may signal an inflection point.
- The Investible Universe Is Deliberately Narrowed: A broad potential universe is screened down to a dynamic asset management company (AMC) investible universe of roughly 250 to 260 companies.
- A Minority Of Stocks Drive Most Alpha: Bhatia said roughly 20% to 25% of portfolio holdings typically account for 70% to 80% of total alpha.
- Exit Discipline Matters: Positions are generally reduced gradually, with immediate exits reserved for a serious breakdown in the investment thesis, management concerns or accounting issues.
- Risk Controls Extend Beyond Regulatory Requirements: Bank of India Mutual Fund applies additional liquidity and concentration guardrails alongside the broader Securities and Exchange Board of India (SEBI) framework.
- Structural Change Is Creating New Opportunities: Manufacturing, supply-chain realignment, trade agreements and emerging sectors are widening the opportunity set for active managers.
Where Active Management Can Still Add Value
Bhatia began with the record of Indian equities over the past two decades.
The presentation showed the Sensex and Nifty 50 delivering approximately 14% compound annual growth over the 24 years to FY2026. That return came through very different market environments, from rapid gains in the early years through the Global Financial Crisis and subsequent recovery cycles.
The indices themselves have already generated substantial wealth. Bhatia focused instead on where an active manager can realistically add to those returns.
Large-cap equities are becoming harder territory. Research coverage is extensive, information is absorbed quickly and persistent alpha is difficult to produce. He sees a better hunting ground further down the market-capitalisation spectrum.
“Large-cap alpha is getting scarce,” he said. “Once you move beyond the top end of the market, there is still a lot on the table for a good active manager.”
Coverage drops materially beyond India’s largest listed companies. Bank of India Mutual Fund believes that gives well-resourced managers more opportunity to find mispricing before it disappears. Its presentation suggested a core-satellite approach, using efficient beta exposure where markets are well covered and active management where research can be more differentiated.
The latest SPIVA India data add an important qualification. Long-term underperformance remains widespread among active funds, including outside large caps, although results differ sharply by period and segment. Active management therefore still has to earn its place; the opportunity set alone is not enough.
Why Mutual Funds Still Matter
Bhatia also highlighted features of the mutual fund structure that remain useful for long-term investors.
Portfolio changes inside a mutual fund do not create an individual capital-gains event for the unitholder each time the manager buys or sells a security. The investor is taxed according to the applicable rules when they transact in their fund units.
That can be useful when a portfolio needs frequent rebalancing. The eventual tax outcome varies by scheme, holding period and prevailing legislation, so the advantage lies in the mechanics of the structure rather than an assumption that every redemption attracts a low rate of tax.
India’s mutual fund industry has also expanded considerably. There were 55 operational fund houses by mid-2026, while industry assets under management reached INR 85.76 lakh crore at the end of July, compared with INR 15.18 lakh crore a decade earlier.
Bhatia pointed to that growth, the regulatory framework and the depth of investment talent as reasons mutual funds continue to warrant a substantial place in domestic portfolios.
Turning Research Into A Repeatable Process
Bank of India Mutual Fund describes its approach as “guided by research, driven by results”.
The process begins with ideation, research and selection, followed by allocation, incubation and validation. Monitoring and exit discipline then determine how positions develop once they enter the portfolio.
“Sustainable alpha should not be a prediction outcome,” Bhatia said. “It should come from a research-driven process that can be repeated.”
A central part of that research is what the firm calls the “rate of change”. Analysts look at shifts in revenue and profit pools, regulatory developments, geopolitics, sector trends and changes taking place inside individual businesses.
The underlying philosophy is growth at a reasonable price (GARP), with valuation discipline applied alongside the search for improving fundamentals.
“The real India story is the rate of change,” Bhatia said. “We spend a lot of time looking at where revenue pools and profit pools are shifting.”
Those shifts can generate ideas from either direction. Policy change may draw attention to an industry from the top down, while company research can identify a business whose economics are improving before the wider market has fully recognised it.
From The Market To The Portfolio
The formal selection process begins with companies above approximately INR 1,000 crore in market capitalisation, giving the team a starting universe of around 1,500 businesses.
The rate-of-change screen is followed by business, financial and management analysis. Around 250 to 260 companies make it into the AMC’s investible universe at any one time. The list is dynamic, with names added or removed as fundamentals and business quality change.
Potential holdings are then considered through a six-badging framework: compounders, challengers, emerging companies, turnarounds, cyclicals and intrinsic-value opportunities.
Bhatia described this as a way to give portfolio managers a common language for different types of investment without removing their discretion.
“You need to give the fund manager room to exercise judgement,” he said. “The framework should guide that judgement, not replace it.”
Once a company enters the portfolio, the team looks for evidence that the expected improvement is actually taking place. Revenue acceleration, margin expansion, stronger earnings, operating cash flow, balance-sheet repair, fresh capital expenditure and improving return on capital employed (ROCE) can all support the thesis.
The ideal entry point comes before those improvements have been fully recognised in the share price.
The 80/20 Alpha Reality
Holdings are re-tested as new information comes through.
Quarterly results, profitability, return on equity (ROE), ROCE, operating cash flow and valuation changes are monitored against the original investment case.
Bhatia said the eventual contribution to performance tends to be heavily skewed.
“In portfolios of 40 to 80 securities, we find that around 20% to 25% of the stocks typically deliver 70% to 80% of the alpha,” he said.
That places considerable weight on what happens after a successful idea begins working. Managers need to decide whether earnings and returns have further to run or whether the market has already priced in much of the expected improvement.
Cash deployment is one of the signals Bhatia watches closely. Operating cash flow may be strong, but the way management reinvests that money can alter the outlook. Poor capital allocation can be an early indication that the investment deserves to be reduced.
Knowing When To Exit
Selling is normally gradual. Bank of India Mutual Fund tends to build, reduce and exit positions over time, allowing changes in valuation, conviction and liquidity to be reflected without forcing an immediate all-or-nothing decision.
A serious problem is treated differently. A collapse in the investment thesis, significant management concerns or accounting issues can lead to immediate liquidation across schemes.
“Making alpha sustainable means taking some money off the table,” Bhatia said. “You also have to exit when the thesis has matured or when it is failing.”
Profit-taking is therefore part of the same process as stock selection. A company that produced strong returns in the past does not keep its place automatically.
Liquidity And Concentration Guardrails
The presentation then moved to portfolio risk. SEBI provides the underlying governance and risk framework for Indian mutual funds. Bank of India Mutual Fund adds its own controls around liquidity and concentration.
One internal watch trigger is reached when cumulative AMC exposure across schemes exceeds 1% of a company’s outstanding equity. The position then comes under closer review from a liquidity perspective.
Cumulative equity holdings are also tested against a board-prescribed liquidity threshold, while stock and sector concentration are monitored each day. Active breaches can be blocked directly at the trading-system level.
Bhatia said these controls are particularly relevant for open-ended strategies, which have to remain able to meet redemptions without creating excessive pressure in less liquid positions.
The fund house generally favours wider diversification over highly concentrated portfolios, especially in small caps.
Where Bank Of India Mutual Fund Sees Opportunity
Bhatia closed with several areas he believes can remain useful in Indian portfolios.
Flexi-cap strategies can move between large-, mid- and small-cap companies as the opportunity set changes. Small caps provide access to businesses participating in faster areas of economic growth, although their liquidity and concentration risks require closer attention.
He also highlighted aggressive hybrid and balanced advantage funds, where asset allocation between equity and debt takes place within the fund structure.
Thematic and sector strategies can have a place when the underlying economic change is sufficiently durable. Manufacturing was one example. Bank of India Mutual Fund’s Manufacturing & Infrastructure Fund dates to 2010 and provides exposure to a theme Bhatia expects to retain relevance as the Indian economy develops.
There is policy support behind that view. India’s Viksit Bharat ambitions envisage a larger role for manufacturing in the economy, while recent trade agreements and shifts in global supply chains are opening new opportunities for domestic companies.
Bank of India Investment Managers Private Limited, the investment manager behind Bank of India Mutual Fund, had INR 15,961 crore in AUM at 30 June 2026, with 24 mutual fund products and a presence in 16 Indian cities.
Bhatia’s case for active management ultimately rests on whether research can uncover change before it is fully reflected in valuations. India’s growth provides a large opportunity set, but capturing more than the market return still requires good stock selection, sensible sizing and a willingness to sell when the original case no longer holds.
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