The Mutual Fund Show | Taking Advantage Of Real Estate Rally Via MFs | NDTV Profit
- Which fund is a better choice for tax advantage?
- Advantage of real estate rally via MFs
Watch ‘The Mutual Fund Show’ with Complete Circle Wealth Solutions' Kshitiz Mahajan and Ventura Securities' Juzer Gabajiwala. #NDTVProfitLive
- Advantage of real estate rally via MFs
Watch ‘The Mutual Fund Show’ with Complete Circle Wealth Solutions' Kshitiz Mahajan and Ventura Securities' Juzer Gabajiwala. #NDTVProfitLive
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00:00 want to play hybrid equity fund for the rationalisation part or they just want to add depending on
00:06 what liquidity they have. So on the fixed income side if they have some liquidity they
00:10 should do. My sense or I'd say what I believe is that they should look for G-Sec fund at
00:15 these levels. It makes much more sense with a hybrid equity fund for the fixed income
00:20 application. Okay, now viewers just to explain, sorry maybe I overshot myself and I should
00:25 have requested Chhithis to add that but we'll get Juzay to do it as well. Hybrid funds are
00:31 essentially with our funds which have a as the name suggests hybrid in nature, have a
00:35 mixture of equity and debt in certain cases have arbitrage as well where the relative
00:40 components of equity and debt are not as much as let's say 65-35 or thereabouts. Target
00:45 maturity funds are essentially debt funds which have as the name suggests target maturity
00:50 of the portfolio of the debt securities that they hold within the fund as well. Now target
00:56 maturity funds are subject to debt taxation, hybrid funds are subject to equity taxation
01:00 as Chhithis already explained. Juzay, I will go back to Chhithis for the maths as well
01:07 but let me first get in Juzay Gabajiwala as well to understand his perspective out here
01:12 and Juzay your view could be different because the fund CEO that we spoke to, her view was
01:17 different as well than what Chhithis is saying. Now I would love to understand if you believe
01:24 that hybrid funds could provide a better alternative to target maturity funds from a perspective
01:32 of somebody who's got enough portfolio size to choose the equity and debt components individually
01:42 or put it in a hybrid fund versus put the equity component separate and the debt component
01:48 separate in a target maturity fund. Yeah, so first of all thanks for having us,
01:54 for having me on the show and so it's you know as actually when Chhithis put it that
02:00 you know target maturity fund if you want to play for interest rate that's a different
02:05 ball game by itself okay. So that basically requires a person to take a call on the interest
02:11 rates and I think most of the investors don't generally you know like to take an interest
02:18 rate call. So you know having said that I think if you look at it very simply if you
02:25 want to compare a hybrid with a target maturity you cannot compare them ideally for the simple
02:31 reason you're comparing apples with oranges right but as you mentioned that you know if
02:35 a person has got an equity and he looks at debt and he can combine that as a combination
02:41 and put it into hybrid that definitely can be done and depending upon what is the component
02:48 of you know equity he wants to have now he's actually got a lot of choices because even
02:55 in hybrid funds there are you know you have dynamic asset allocation, you have aggressive
03:01 hybrid where the allocation is nearly 65 percent and you also have balanced fund where the
03:07 allocation is around 50 percent right. So in terms of taxation if you go to see what
03:16 I look at is that supposing if somebody has got a three-year time horizon and if he even
03:22 opts for a balanced fund which is slightly conservative okay not the conservative hybrid
03:28 because it attracts the full taxation rate but if somebody goes for a balanced fund and
03:34 or a dynamic asset allocation fund which is debt oriented and even if he takes the benefit
03:41 of indexation over a period of three years the taxation impact is hardly anything so
03:47 on equity oriented fund you would pay a 10 percent tax whereas over a year you would
03:52 pay maybe 11 percent tax okay. So over a three year plus time period the taxation of equity
03:59 and debt more or less gets neutralized. I hope people will be able to understand because
04:06 taxation has now become a little bit complicated so and obviously that gives a better risk
04:12 reward return because if you target around let us say between anywhere you know 9 to
04:18 11 percent depending upon what is the equity exposure and what time horizon you're looking
04:23 at you can get in a hybrid fund somewhere the post tax of around 8 to 9 10 percent whereas
04:31 the target maturity fund will give you your post tax will be 4.9 to 5.25 right now I'm
04:37 assuming that the person is holding the fund to maturity okay I'm not looking at somebody
04:42 who's playing on the interest rates if he plays on the interest rates and as it is said
04:48 it would actually you know change. Right, no Juzair let me come to this then so okay
04:55 thanks for clarifying that for longer than three years this taxation is 10 11 percent
05:00 I thought it was different but let's assume that that's the case what about something
05:05 that Shruthi mentioned and I want to come to you leave the interest rate timing piece
05:11 out I'll get Shruthi's on that but on a time horizon which is less than 15 months or less
05:19 than 18 months let's say and therefore the taxation is well and truly defined and well
05:27 and truly different for both categories right my simple question is that if I have let's
05:34 say 30,000 rupees or 35,000 rupees in debt funds and 65,000 rupees in equity funds and
05:43 if I'm paying the full taxation on that 35,000 rupees for a debt fund which I'm invested
05:49 for less than 15 months or less than 18 months is it better to therefore choose an adequate
05:57 hybrid fund so that I have to pay an overall taxation of just the equity taxation as opposed
06:03 to debt taxation that I pay for the 35 of the portfolio no neither did I do not the
06:09 map will not sit out of there because you are talking about then even investing in an
06:15 equity fund with a 15 month time horizon and we generally when we advise investors even
06:22 if you want to look at any hybrid fund you are talking about you know three year time
06:26 horizon now with a 15 month time horizon the target maturity fund even if you take it as
06:33 into an hybrid component right you may not get that return because the equity markets
06:39 I mean as it stands today we have had a fantastic run up in the last year now whether the same
06:46 thing is going to go ahead down the line nobody knows whether how the next year is going to
06:52 pan out so let us say for example today if I had to invest money into a hybrid fund and
06:59 I would say that you know because I have the 35,000 which I can put into a target maturity
07:03 and 55,000 into an equity fund I hope I've understood your example correctly or I would
07:09 put you know maybe that a lakh in into a hybrid fund and withdraw that money after 15 months
07:17 my returns would be completely different so you cannot like I said we are actually these
07:23 are two products which are actually an apple and an orange so I would definitely not advise
07:30 anybody to invest in a you know hybrid fund in any event.
07:35 Sure which it is okay my before we slip into a break I'm giving I'm forcing a scenario
07:41 out here when somebody has only that period in mind let's say existing investments of
07:45 into debt and equity both right now two factors it is two questions rolled out differently
07:52 one is if one doesn't want to play the interest rate call as Juzair was saying is it advisable
07:58 therefore then to do a tax call here or no part one and part two please explain the math
08:04 of somebody who is willing to go out and take that interest rate call because there are
08:09 people of all kinds right there are people who come on the show who send the queries
08:13 and say we believe rates are going to go down now tell us which are the funds to bet on.
08:18 Well sir Nigarj coming back to the first question I think if you don't if you don't have much
08:26 time on your side then and you are at peak of interest cycle then I think you should
08:31 take and take a call and look at playing a interest cycle because normally we end up
08:37 entering on the wrong side of the cycle I'm saying we are very close to you know rate
08:42 cuts around the corner and we are very close to that once you do that taxation wise I agree
08:47 with you but when you have you know overall sum which is coming to 11 to 12% on your side
08:53 on the fixed income let's say gild fund side then still post tax you will end up making
08:57 it another 9% on the hybrid fund side the only problem with less than 3 years is that
09:04 you might get a benefit of rate cut on the fixed income portfolio which is as I said
09:09 will not be more than 1% overall yield because on an average modified duration of between
09:14 4 to 5% and it's 20 to 25% in a portfolio but you might end up losing some money on
09:19 the equity side if market will not fair up well so one should avoid doing that.
09:24 So second part when you said on the gild side or let's say on the fixed income side I'll
09:28 just explain and make simple this math very simple as I said you have to pick and choose
09:33 the journey let's say if you look at a gild fund you have 3 years horizon or 4 years horizon
09:38 but we are very close to I think investors have big doubt we are very close to rate cuts
09:42 happening so if you enter at this level and you have a YTM which is yield to maturity
09:49 which is the actual coupon of a fund which you will get normally if you hold it for the
09:54 entire time frame but let's say yearly coupon is 7.5% on an average across gild fund and
09:59 you have duration which is around 4.5 to 5.5% and you have a rate cut which is coming let's
10:05 say 1% in next 1 years time now that entire portion of modified duration which is 4.5%
10:12 will get added because as yield you know the rate cut happen your bond price goes high
10:19 this is the immersion that's how fixed income market works and that benefit you get with
10:24 the existing portfolio also so you know it gets added immediately so in a years time
10:29 you can look at on an average anything which is above of the budgeted return on a fixed
10:36 income gild fund portfolio so I think there are 2-3 names which have done very well and
10:41 where we are competent but one should do their own due diligence one is Vandan gild fund
10:47 SPI is there Nippon is there and I think this is a very important part of any allocation
10:51 asset allocation we can't just be sitting on I mean we should say like you know when
10:56 it shut it forget it this can't be the scene now you have to play little actively I am
11:00 not saying keep on churning the portfolio but you can't miss on these opportunities
11:03 which comes around you so I think once you look at the gild side of the portfolio where
11:08 you can easily make double digit return from here onwards.
11:11 Got it so viewers 3 names are there from Shittes and keep in mind I think we have given you
11:15 both sides of the argument you depends on what kind of an investor you are you can choose
11:21 to play the way either Shittes or Juzair mentioned we need to slip into a very quick break but
11:27 on the other side of the break we talk about one more very interesting topic on the mutual
11:31 fund side stay tuned.
11:32 Thank you.
11:35 Thank you.
11:49 Thank you.
12:04 Thank you.
12:23 Thank you.
12:44 Thank you.
13:05 Thank you.
13:26 Thank you.
13:37 Back with the mutual fund show right here on NETV profit in conversation with Shittes
13:41 Mahajan and Juzair Gabajiwala.
13:43 Gentlemen I have 5 minutes on the show so I will be forced to choose talk about one
13:47 topic the one that I think will be relevant would be how do people take advantage of this
13:54 whole move that is happening in the real estate and allied sectors in the equity markets on
13:59 the mutual fund side.
14:01 Now Juzair have you guys done an analysis of which funds are heavy on the real estate
14:07 side if somebody wants to take that call that by I believe that real estate will do well
14:12 and therefore I want to choose funds which will do well then which are the funds to choose
14:16 what are your thoughts.
14:17 Yes so actually I mean what we saw is that you know we have been also doing some thoughts
14:23 on how the index has been behaving and we saw that you know the reality index has moved
14:29 up by nearly 76% in the last you know calendar year and then we try to see that you know
14:36 where are those you know stocks anything which is available but unfortunately you know you
14:41 hardly find much of exposure even in the thematic space so you have this housing opportunity
14:47 fund as one of the you know plays which are there but on an average the exposure is somewhere
14:55 around 7 to 8% of the entire corpus so there is no you know specific you know thematic
15:03 fund which is you know purely into the reality but one way how a person can actually look
15:08 at playing is could also be through the infrastructure space because reality will basically require
15:14 you know your steel and your cement and it is a lot of more things than just you know
15:20 real estate as a entity so one way and we have seen that you know Infra also started
15:27 doing well and so an infrastructure theme can be a better play than you know just a
15:34 pure real estate play.
15:36 There are clutch of Infra funds out there Juzair, do you guys like one over the other
15:40 or are there a series of two or three recommendations it may not be an exhaustive list but an in
15:44 indicative list?
15:46 So I mean we are not able to give out you know recommendations.
15:51 Okay.
15:52 You know maybe you can look at the ones which have been there in the market for last you
15:55 know 3 to 5 years look at those existing players you know and see which have got a consistent
16:01 performance but as it is the stock cycle is little bit less so you know and only a little
16:06 bit differentiation because when Bandhan was IDFC and they had the Infra fund they were
16:13 actually you know avoiding banking so that was you know they were looking at a pure as
16:18 an Infra play over there so that is the distinction which if somebody wants to look at it you
16:22 can just have a look at it again.
16:25 Got it okay.
16:26 Shetit has come to you for the same question really it is a wide bucket and I sorry I should
16:31 have clarified I do not mean only real estate the listed names but also real estate plus
16:36 allied sectors it could be pipe companies, cement, steel companies whatever how to best
16:40 choose which funds will gain the most from this?
16:45 So Neeraj I will make it very simple I think one can take a sectoral call but in sectoral
16:50 call you need to come at the bottom of a cycle and you need to exit at the top of a cycle
16:56 which never happens so it becomes very little difficult for all the investors at their end
17:02 also having said that there are couple of index fund from UTI and from Kotak which are
17:08 S&P BSE you know housing index fund where you can take exposure where Clarecut Realty
17:14 sector has 23-24% exposure and as said by Zuzair there are lot of funds where like Tata
17:21 housing fund is there, HFC housing fund is there we have 12-14% exposure to realty sector
17:27 but as you said you know your realty as a sector is a very vast sector which has many
17:33 sub sectors it includes cement, tiles, pipes, FMEGs lot of other things which are there
17:40 which are related to this sector I think best is to play through a flexi cap or multi cap
17:44 fund where you have a better exposure towards this side rather than just playing it only
17:49 through a sectoral fund because then one is then you can run that fund and depending on
17:55 what sector is right now looking attractive from magic energy in those sectors rather
18:00 than just holding on to it but for you exiting and coming in will become very difficult because
18:05 then it becomes really difficult because market is moving very fast and sector rotation is
18:12 very fast so tomorrow some other thing was working today some other thing is working.
18:16 My suggestion here is that one should not look at pure pro-sectoral approach whether
18:20 through housing or infra but rather just look at a flexi cap or a multi cap fund or a focus
18:25 fund where you have a better weightage towards housing or broadly realty oriented sectors
18:32 that's one should look at.
18:36 Point well taken now unfortunately we are completely out of time on this but I commit
18:39 to you viewers in the next one or two months we will get Shruthi back to talk about these
18:43 kind of funds as well and do a very interesting conversation with Juzair as well on some of
18:48 the research that they publish almost regularly.
18:49 Juzair it has been a while that we have discussed one of your research notes so we should do
18:53 that soon but gentlemen both of you thank you for taking the time out and being with
18:56 us today on the Mutual Fund Show really appreciate your time.
18:58 Thank you.
18:59 Thank you, thank you for having me.
19:01 The pleasure is ours and viewers thanks for tuning in to the MF Show stay tuned lots more
19:06 coming up on NDTV Profit.
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