Girish Karnad's "Nagamandala" is indeed based on folk stories he encountered. Specifically, it's widely acknowledged that the play draws from Kannada folk tales that Karnad heard from A.K. Ramanujan.
A.K. Ramanujan:
He was a renowned scholar, folklorist, and linguist.
He collected and translated numerous Indian folk tales.
Karnad acknowledged that the stories that formed the basis of "Nagamandala" were among those he heard from Ramanujan.
Folk Stories:
The play weaves together two primary folk narratives: one involving talking flames and another concerning a woman visited by a cobra that takes her husband's form.
These stories are firmly based in the oral traditions of Karnataka.
Therefore, it is accurate to say that Nagamandala is based on two folk stories which Karnad heard from his guru A.K. Ramanujan.