Mumbai, Jun 11, 2024
“We are constructive on Indian equities from a five-year perspective. Currently, we think large-cap funds offer a better risk-to-reward ratio over mid and small cap in the medium term (9-12 months atleast),” says Alekh Yadav, Head of Investment Products, SanctumWealth.
In an interview with ETMarkets, Yadav said: “We suggest taking the bulk of large-cap exposure via index funds and select smart beta funds. Flexi-cap funds provide the balance large cap exposure and cover some amount of mid and smallcap exposure,” Edited excerpts:
How should MF investors play the political uncertainty? Which theme is likely to do well?
The election results surprised many market participants, as most had expected the BJP to secure a majority on their own. Consequently, there was a negative market reaction to the outcome.
However, political uncertainty has eased considerably in the past few days. Mr. Modi is anticipated to be sworn in as Prime Minister for the third consecutive term.
We anticipate the government will maintain its focus on infrastructure, capital expenditure, and manufacturing.
Nevertheless, given the electoral response, there may be measures aimed at creating more jobs and improving rural income. Additionally, some steps will likely be taken to appease coalition partners.
Therefore, while short-term volatility is expected, we maintain a positive outlook on the Indian economy over the medium to long term.
We believe that government support, coupled with a favorable monsoon, will lead to an increase in rural consumption, making it a theme we favor.
After seeing a 6% fall on election day what are the things which retail investors should avoid doing?
PSU and stocks of certain groups experienced significant rallies in the run-up to the election and following the release of exit polls. As a result, the valuations of some of these stocks have now entered expensive territory.
In light of the election outcome, we believe these are segments that retail investors may want to avoid.
Indian enjoyed premium valuations amid strong fundamentals. Do you see derating in the market amid political uncertainty?
One of the reasons for the premium valuations was attributed to political stability, in addition to strong fundamentals.
We believe that the fundamentals of the Indian market remain unchanged following the election results. However, political uncertainty complicates the justification for premium valuations.
While we do not anticipate a sharp de-rating, a period of time correction and possibly some price correction cannot be ruled out.
What will work best after the recentfallfor retail investors — lump sum investment, SIP, or STP (weekly)?
Amid uncertainty, adopting a staggered approach is typically advisable.
Investors may consider SIPs, and any significant correction could be viewed as an opportunity to make lump-sum investments.
If someone plans to put Rs 10,00,000 in mutualfunds — what proportion should be index funds, balance funds, flexi cap, etc.
We currently prefer addressing the large-cap space through index funds. We have some allocation to flexicap funds and mid cap funds. For an aggressive risk profile having 70-80% of investments into equity.
About 20-25% would be invested in index funds, which will take care of the bulk of large cap allocation. Another 15-25% could be invested in mid/smallcaps funds.
While the balance could be invested in flexi-cap funds that will allocate across market cap.
Are there any top funds that you can recommend for high-risk investors for the next 5 years?
We are constructive on Indian equities from a five-year perspective. Currently, we think large-cap funds offer a better risk-to-reward ratio over the mid and small-cap in the medium term (9-12 months atleast).
Generally, for our clients, we focus more on a winning combination (a wellconstructed portfolio of funds) over a string of funds with strong, recent outperformance.
While every investor’s optimal portfolio construct might be unique to them, our aggressive model portfolio comprises the following.
We suggest taking the bulk of large-cap exposure via index funds and selecting smart beta funds. Flexi-cap funds provide the balance large cap exposure and cover some amount of mid and smallcap exposure.
We also suggest adding dedicated midcap funds. We typically don’t suggest small cap mutual funds as they tend to get flows in lumps which could create liquidity issues when the market cycle turns.
In case the investable corpus is significant we also suggest adding a few wellselected PMS strategies.
– Alekh Yadav, Product Specialist
For more information, please visit www.sanctumwealth.com
Social Media –LinkedIn |Twitter |Facebook |Youtube