(Bloomberg) -- A top-performing Indian hedge fund that was bold enough to load up local shares in the depth of the March selloff is now turning cautious on the country’s stock market after a stellar rebound.

True Beacon One, which manages about 3 billion rupees ($40 million) of Indian equities, has trimmed its bullish bets on stocks and is keeping 80% of its investments hedged, according to Nikhil Kamath, the co-founder and chief investment officer of the fund. The one-year-old fund has outperformed the NSE Nifty 50 Index by 29% this year, making it one of the best performers among local peers, data provided by the asset manager show.

“At the current juncture, we believe that markets have run up ahead of fundamentals, we see significant pain in businesses on the ground,” Kamath said in an interview. “Still, the same is not accurately reflected in stock prices. Investors at this point have become a bit too callous and are ignoring underlying fundamentals.”

The Nifty 50 index has bounced about 50% since the coronavirus-induced swoon in March, beating the Asia Pacific benchmark and almost on par with the gains in U.S. shares. The rebound has drawn retail investors that have bid up penny stocks and riskier companies, overlooking the dire state of the economy ravaged by the pandemic and the fact that India has the third-highest number of coronavirus cases in the world.

True Beacon, which invests only in large-cap stocks and is up about 21% this year, is adding shares of software exporters and pharmaceutical companies. Reliance Industries Ltd. is another one that the fund had been adding. It is the only Indian alternative to the so-called FAANG companies, the quintet of Facebook, Apple, Amazon, Netflix and Google, Kamath said.

Most hedge funds in India do not publicly disclose performance, but an index of the nation’s 14 long-short equity funds compiled by Eurekahedge shows a 1.3% return this year.

The fund is also cautious about investing in shares of real estate and commodity firms, and those reeling under debt, according to Kamath.

“We would advise retail investors to stick to bluechip companies and maintain ample amount of diversification on individual portfolios. At this point, it is prudent to have many hedges in place,” Kamath said.

©2020 Bloomberg L.P.