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00:00 Nikhil, great having you as always.
00:02 Thanks for taking the time out and good afternoon to you.
00:05 And Nikhil, it's a pertinent argument because at the start of the year, the belief was of
00:11 rate cuts, which now has gotten diluted.
00:13 We're talking to two, three economists who are saying that they foresee that there'll
00:17 probably not be any rate cut this year.
00:19 So my question therefore is, do you think the BFSI funds are well positioned to navigate
00:24 through that or is it prudent to recalibrate investments that investors may have in BFSI
00:33 funds because of the change in rate cut trajectory?
00:37 So specifically on the rate cut, so what happens is that when there's a rate cut, banking makes
00:41 benefit on the treasury side of it.
00:44 And as a result, they show higher profits.
00:46 So that's on the rate cut side of it, what leads to the banking as a sector.
00:50 Okay, apart from obviously the rates comes down so they can have a more great, great
00:56 rate offtake and so on and so forth.
00:58 But on the other side of it, I'll say that if you look at all the sectors in the industry
01:02 right now, in the markets right now, only banking and financial is primarily one sector,
01:07 which is slightly, which is not run up as compared to all other sectors.
01:11 So from a valuation standpoint of view, this sector still looks reasonable as compared
01:15 to many other sectors.
01:17 It's again, there are a lot of large players and private banks have not performed that
01:21 great.
01:22 Second thing is that banking and financial services as a fund, from a fund house perspective,
01:25 the universe has increased quite a lot.
01:27 Earlier, we only had banking companies.
01:30 Now we have mid-term companies listed in the stock market.
01:32 We have FinTech companies listed in the stock market.
01:34 We have insurance companies listed in the stock market.
01:36 So the universe of banking, financial services as a fund has increased quite a lot.
01:42 But those sectors are not impacted by rate cut as such.
01:46 Those are more structural story for India.
01:48 And since the financial savings is increasing, all these sectors are going to benefit.
01:52 So I would say from a valuation standpoint of view, banking, financial services at the
01:56 current juncture looks reasonable.
01:57 But yeah, obviously, it can, the performance may get delayed by a couple of months because
02:04 of the rate cut scenario not playing out exactly what was planned out.
02:08 But over the long term perspective, the sector looks good.
02:11 But I'll say more from an investor perspective, a lot of divestiture funds have 20 to 25%
02:18 of their money in banking and financial services.
02:22 So it can be a technical play, but most of the fund houses do have a huge amount of exposure
02:27 in banking and financial.
02:28 So going over out and only buying banking and financial services may not be that wise
02:34 call because you already have exposure to the sector.
02:37 You can take a technical call, depends on when you believe the delusions are reasonable.
02:41 And all written down, that is the point of time you can increase exposure, but not as
02:46 a long term thing because you already have a 25% in banking and financial if you invest
02:50 into most of the divestiture funds.
02:54 But the rate trajectory doesn't alter your view or the change in the expectation of rate
03:00 cuts doesn't alter your view around BFSI funds.
03:03 It is mainly the undervalued banking names that is leading you to say this.
03:09 That's right.
03:10 So from a valuation perspective, that's already factored in the market and that's why they
03:13 have not run up.
03:14 So, and since you have all other sectors, like you can, you can participate in visual
03:17 fund companies, insurance companies, fintech companies, and they, those companies are structurally
03:21 going to benefit once more and more Indians start investing in markets, more and more
03:27 Indians come to a financialization of savings.
03:30 So that is any structure is going to increase the, this exposure or this component.
03:34 And second thing is that we have not seen the great off-tech happening till now.
03:37 Once the great off-tech start happening, when the private capex start coming in, then you'll
03:41 also see a good amount of increase in the banking and financial services as a profitability
03:46 for them as a, as a long term story.
03:49 Okay.
03:50 And either as a recommendation or maybe not as a recommendation, but which would be some
03:54 of the prominent BFSI funds Nikhil that you would believe an investor will hold it in
04:00 good stead.
04:01 This will not be an exhaustive list and need not be particular recommendations of viewers.
04:04 If Nikhil mentions names, please do your own due diligence as well.
04:07 So I'm just giving you a few of the banking financial services funds which are available
04:11 in the market.
04:12 Like you have a Bandhan Banking and Financial Services Fund, you have an On Banking and
04:15 Financial Services Fund.
04:16 So those are few funds which you can look at it.
04:18 But as I said, as I said, you already have 25% exposure to it.
04:22 If you're looking at a diversified fund, they have 25% exposure to Banking and Financial
04:26 Services Fund.
04:27 But from a technical play, if you believe they are undervalued, in that case, you can
04:30 look at few of those banking and financial dedicated funds as such.
04:34 Got it.
04:35 Okay.
04:36 So well, so that's some answer and viewers, please do your own due diligence if you need
04:42 think of going into any of the BFSI funds.
04:44 But you heard Nikhil's argument, he believes that this change in trajectory according to
04:49 his priced in as well and which is why from a valuation perspective, some of the BFSI
04:54 funds might actually be a good play according to Etika.
04:58 Now a couple of queries, in fact, three or four queries, we'll try and take as many as
05:02 we can, but let's start with two at least.
05:04 The first one is from Suraj Kumar, his age 30 years.
05:08 Goal is lump sum returns.
05:11 Okay.
05:12 Suraj is saying Nikhil that he has invested 3 lakh rupees in Parag Parikh FlexiCap fund
05:18 and is planning to invest 50,000 rupees by an SIP in the same fund.
05:24 How long will it take for him to garner a corpus of a crore rupees?
05:29 Any thoughts?
05:30 Okay.
05:31 So from a fund perspective, this is a very good fund and you should continue to invest
05:35 in that fund and you should continue the SIP.
05:37 I'll just give you a ballpark number.
05:39 So this fund over the last 10 years has given 19% year on year return, but that should not
05:44 be your anchor thought that this fund will continue to make 19% year on year return.
05:48 Even if I assume two scenarios, if you make 12% incrementally year on year return from
05:52 today onwards, with your current investments and your SIP, you should be able to reach
05:56 a mark of one crore in nine years.
06:00 And if market gives you 15% return and the fund delivers 15% return, you can achieve
06:05 this target in 7.5 years.
06:06 So I think 12 to 15 is what you can expect and in 7.5 years to 9 years is what you can
06:11 expect to reach your milestone of one crore.
06:14 Nikhil, I've been asking this question to a few people.
06:17 Parag Parikh and some of the other successful FlexiCap funds have a larger corpus now, larger
06:22 AUM.
06:23 Could it become difficult to outperform or perform as well as they've done in the past?
06:28 And therefore, while normally tried and tested funds always work better, but there are a
06:35 few newer funds that have come in in the FlexiCap category, which are managed by very experienced
06:42 fund managers with a track record, like Old Bridge Nav is a FlexiCap fund, if I'm not
06:46 wrong.
06:47 Trust Mutual Fund has just launched and it's managed by Mihir Vora, who's a very experienced
06:51 man.
06:52 There is Helios, which has got a FlexiCap fund with a Sameer Arora Vintage out there
06:56 too.
06:57 So, these are smaller funds.
06:58 Could they be more agile and more amenable or for somebody who's willing to take a risk,
07:06 could they give better returns than a large AUM fund like a Parag Parikh or an HDFC?
07:12 So from a FlexiCap category, obviously as the AUM increases, your flexibility to change
07:17 between sectors will be very limited now.
07:20 A good part of Parag Parikh is that they have some international exposure, they have a large
07:24 exposure and they have a small amount of middle and small-cap exposure.
07:27 But as you rightly said, what has happened in the past, the ability to move around sectors
07:31 and stocks may not be that easy now.
07:35 From a portfolio perspective, this fund is more like now, they'll be slightly biased
07:38 towards large-cap stocks.
07:39 So if someone is looking for that exposure, it's a good fund.
07:43 And since the fund may have continuous and from the fund house perspective, they don't
07:47 find too much of a problem in terms of changing the sectors and stocks.
07:50 But still, what I'll say is that flexibility will be reduced.
07:53 Obviously, from a portfolio perspective, clients should have both types of funds.
07:57 They should have funds, some with a reasonable AUM or slightly smaller size AUM so that the
08:03 fund manager gets the flexibility to change across the sectors and stocks.
08:06 And some, you can have a legacy portfolio long-term, which have been proven over a period
08:10 of time.
08:11 So you can have a portfolio which is divisible of 4-5 funds, you can have some funds which
08:15 can be large-cap biased and have a long history.
08:18 And some funds you should have also in a medium-sized AUM or smaller-sized AUM where the fund manager
08:23 will have the flexibility to go out for a longer period of time.
08:26 Nikhil, one more query, we'll have to make it quick out of time, but Ganesh Gomu, age
08:31 57 years, goal is retirement, wants to invest Rs.25 lakhs in mutual funds.
08:37 Can you recommend a few schemes?
08:39 So in this case, I'll say you have to follow a bucket strategy.
08:42 What you need to do is that since you're close to retirement, you need to divide the money
08:45 in 4 different buckets.
08:46 The first bucket will be like an equity savings fund, where you invest for, because since
08:51 you're retiring in the next 3 years, you'll have some corpus which you can withdraw from
08:54 initial years, which is from 60 to 64, 65.
08:57 The second set of money you need to invest in a hybrid fund, which has got 65 to 70%
09:01 in equity and 25% in debt, so which gives you exposure for the next 7-8 years.
09:06 And beyond money which you require after 10 years, that should be in a flexicap fund or
09:11 a money cap fund, which can also beat inflation and grow the corpus over a period of time,
09:16 which can fund you money for later years.
09:17 So I'll say that divide your money in 4 different buckets, equity savings fund, hybrid fund,
09:22 money cap fund and a flexicap fund.
09:25 Okay, great.
09:26 And Ganesh, I would urge you to consult a financial advisor who's good in your mind
09:33 to try and design this for you, because it's for a very crucial part of your life, which
09:36 is the retirement wherein the incomes may not be there, but you will certainly have
09:39 the expenditure and this will be a bucket from where you will get the money to be able
09:43 to live your life.
09:44 So please try and do that.
09:45 Nikhil, thanks for joining in this truncated version of the Mutual Fund Show.
09:48 Really appreciate your time.
09:49 Thank you.
09:50 Thanks a lot.
09:50 [Music]