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00:00Hello and welcome to the Mutual Fund show on NDTV Profit.
00:12I am your host, Neeraj Shah.
00:13As always, we will try and bring you some key actionable points.
00:16We will try and address some of the queries as well and we will try and talk about a couple
00:20of topical points when it comes to the markets.
00:24Our guests today, Shruthesh Marjan, Managing Partner and CEO of Complete Circle Wedge Solutions
00:28and Siddharth Srivastava, Head of ETF Products and Fund Manager at Mire Asset Investments.
00:33Jamin, both of you, thanks so much for joining in.
00:36We are going to start off by talking about Momentum Funds and one of the reasons why
00:41we are also doing this is because Mire is going to be launching the Mire or has launched
00:48the Mire Asset Nifty Mid-Small Cap 400 Momentum Quality 100 ETF.
00:53Okay, that's a long name, but it's a simple product, I guess, and let's try and understand
00:57the product and what kind of investor should go for it and whether or not you should go
01:02for it.
01:03So, of course, Shruthesh, I urge you to play the devil's advocate here when you do, but
01:07I'll start off the conversation with Siddharth.
01:09Siddharth, what's the rationale for launching a fund of this nature in the current investment
01:16climate?
01:17First of all, Wild Era 56 Mid-Cap and Small Cap Funds have a minimum of roughly 5.6 lakh
01:27crores.
01:28There is no category which takes care of mid and small cap together.
01:36So the category does not exist on the active side.
01:39Hence, no fund focuses on mid and small cap alone in a focused manner and there is no
01:47fund which targets mid and small cap together on the passive side also.
01:52So the idea was to create an offering which can provide exposure to mid and small cap
02:00segment at one go.
02:02So this particular fund will select 50 mid-cap stocks and 50 small cap stocks in the 100
02:12stock portfolio and the rough allocation from a weight point of view will be 70 to 80% towards
02:18mid-cap and 20 to 30% towards small cap.
02:22The idea is to add sorts of small cap flavor without increasing the risk profile of the
02:29fund too much.
02:33So is there a methodology or does it passively follow a particular selection?
02:42Give us some details about this aside of just the pure allocation between mid-caps and small
02:47caps Siddharth.
02:49So basically you mentioned that momentum funds are getting very popular and these funds tend
02:55to work well during bull market but may suffer during bear market because ultimately you
03:01are investing in stocks which are doing well and these strategy based funds may end up
03:09performing significantly when there is volatility.
03:12What we try to do here is to create an all-weather portfolio and we are trying to achieve that
03:18by picking out stocks based on quality metrics also and momentum metrics also.
03:26So all the mid and small caps will first be filtered out based on liquidity parameters
03:33which are thinly traded, which have high promoter pledging, very less listing history, too many
03:39stock circuits etc. and then remaining mid and small cap stocks will be assessed on both
03:46quality metrics which is profitability, earning stability, low leverage as well as momentum
03:53metrics which is risk adjusted performance and whichever does well on both will form
03:59part of the portfolio.
04:01Now the idea is to in a way capture the upside using momentum in bull market and sorts of
04:08continue providing portfolio stability when market is volatile or market is in correction
04:14mode.
04:15So that is what we are observing when we have back-tested this strategy, the NSE has back-tested
04:21this strategy since last almost 19 years and that is the kind of behaviour these funds
04:27exhibit.
04:28A bit of momentum capture in bull market and portfolio stability during volatile markets.
04:35Come in on this, one the nature of the product focused on mid caps and small caps at a point
04:41of time and everybody is saying that large caps are cheap and mid caps and small caps
04:44are not, part one.
04:45But part two, in a good market space momentum funds tend to do very well, momentum strategies
04:51tend to do well, forget funds, sorry, I mean momentum strategies, not necessarily the most
04:58tried and tested strategy per se for investors, how good or bad would a strategy like this
05:06be for mutual fund investors, what kind of investor should go for it and another point
05:12is people talk about whether products like these have liquidity issues or constraints,
05:19is that something that you take into account as well?
05:22So Neeraj, first of all coming back to that what type of client should look into this
05:26type of strategy.
05:28So we have three questions, so first I think this can be a tactical allocation in client's
05:33portfolio because momentum strategy played well really in last three years because the
05:38market has been doing really well and it has to do with markets, that markets have done
05:44well because momentum strategy basically works on technical charts, it works on various metrics
05:50like moving average, RSI and then depending on what type of ups and momentum there in
05:56the market then you pick the better ones in that momentum, let's say it is a broad
05:59based rally but then you see there is a rally, let's take for last one year example was
06:03in PSEO defence sector, you have picked that stocks, so out of those 400 stocks let's
06:07say you take that 100 part of the stocks but it has already rallied too much, small cap
06:12and mid cap sector and I have nothing against the strategy but it's little or maybe the
06:18most high on the risk reward metrics in terms of as we speak now, so I think one is that,
06:26second is if somebody want to take allocation it can be 5% to 6% allocation in these type
06:32of strategies, third when you talk about the liquidity part in ETFs specifically we don't
06:38have that depth in the market in India, still the basic mode of investment is through mutual
06:43fund rule or index fund rule, where you don't have the right market makers because market
06:48maker makes that ETF pool and through which you can buy or sell, but good part about Mirae
06:55is they have their own Mirae capital which they have their own market maker, so there
07:01the money which you pay or premium which you pay when you sell your units is quite less
07:06and it's very much in that affordable range where you don't lose on the return, then in
07:11few ETFs, why the cult is not increasing in India is because market maker is charging
07:15a lot because not many people are coming because in the normal mutual fund you don't have to
07:19open a Demat account but when you go for a ETF you do open a Demat account, that's the
07:24difference, so I think that this type of strategy is good when the market is doing good but
07:30it can't be your core strategy, it can be a tactical strategy and I think on a broader
07:35market basis if you are playing momentum and quality both on small and mid cap at these
07:39levels it can be little riskier, but yes I think I'm sure Mirae has its own plan, they
07:46must be staggering and looking at a better side of the portfolio, so they must be looking
07:50at the quality aspect also, so they have both things going their way.
07:54Okay, Siddharth coming on this point, one the liquidity aspect for ETFs and how, what's
08:02your response there part one and two something that I highlighted at the start and Shitesh
08:06referred to as well right, it's the point of time in the market wherein valuation wise
08:12large caps are considered the most attractive relative to mid caps and small caps wherein
08:17at least at the mid cap end the valuations are high and I heard you say that 70% of the
08:22portfolio might be mid cap, so why the timing of this one particularly?
08:27That is the most, so I'll address the valuation question first because that is obviously the
08:37most talked about part, so see there is froth and stocks are overvalued not only mid and
08:47small cap segment but large cap segment also right, there are companies which have very
08:53frocky valuation in all the three segments while on an overall basis yes, large cap looks
08:59more reasonably placed from a valuation point of view and that is why when we are going
09:05out and we are talking about this fund, we are saying that if your investment horizon
09:10is one to two year do not invest in this fund but we believe from a four year, five year
09:18plus point of view small cap and mid cap will give pretty good returns, pretty reasonable
09:25returns, so our communication is pretty straightforward do invest in small and mid cap only from a
09:31long term point of view for short term one to year stay in large cap segment but then
09:37again no one can predict the market right, in last two years our market expectations
09:44regarding US, regarding Fed rate cards, regarding how small and mid cap will perform since 2023
09:51have been sorts of not proven right, so it is best to focus on asset allocation and stay
09:59invest for the long term, now when it comes to when it comes to liquidity of ETFs on exchange
10:09like the gentleman mentioned we have our own market maker which is Mira Asset Capital
10:14Markets who provide liquidity in our ETFs on exchange at all times around the live net
10:25asset value, so in our case typically investor will be able to invest at right prices and
10:33redeem at right prices on the exchange.
11:03which are investing into manufacturing and you will ask are there manufacturing funds,
11:06yes there are, there are in fact now a slew of fund houses which have got a specific manufacturing
11:14fund from a Quant to a Kotak to ICICI to HDFC a clutch of names out there, question to you
11:20Shatish Mahajan, should people choose manufacturing funds and invest in them why or why not, should
11:27they be a part of core or satellite portfolio, normally people might say satellite but in
11:32the current India do they become a part of core as well.
11:35So I think this is one of the good question which I have come across in recent times but
11:40you ask me this can be a part of your core portfolio although it is a sectoral approach
11:44which you when you buy a manufacturing fund but because if you align your entire goal
11:50or your wealth planning with government focus right now what it is, which is they are saying
11:54that as you said that 25% of the GDP contribution should come from manufacturing by 2025, we
11:59are around 18% right now and you see PLI for 14 sectors, you see global giants coming
12:05to India, it doesn't only bring global money or foreign currency, it also create jobs also.
12:10So I think that clear cut focus is there and I am not talking here about that we are competing
12:15here with China but there is enough room or let's say there is enough demand from your
12:20domestic population only, we have a population of 140 crore plus people, so I think it can
12:25be a part of your core portfolio and eventually I am not saying other sectors did not do well
12:30but yes there is a clear cut scope wherever you are meeting promoters, we are going and
12:35visiting plants, we are meeting promoters, we are meeting their manufacturers, their
12:38buyers, suppliers, vendors, everybody is talking about expansion, they are doing capex, you
12:44meet more people than what I meet but I am telling you that clear cut focus is there
12:48that was yes we want to multifold our capacity, how we can grow and obviously there are certain
12:55gaps which we need to plug but yes one can look at making manufacturing fund as a part
12:59of the portfolio.
13:00I am not recommending here any fund or any new offering but I am saying that this can
13:04be looked at clearly from a point of that was eventually this entire theme will not
13:10only create some growth for you in your wealth portfolio but as a government also if you
13:16see we have to focus on manufacturing for carving out new jobs, for getting foreign
13:21currency, for getting the bigger picture in place, so look at that number, keep that
13:27number in your radar that 25% overall GDP will contribute and they are very much on
13:35line with that.
13:36Okay, very quickly Shruthi, if you had to put in a fresh portfolio right now for yourself,
13:41what percentage of your portfolio might go into manufacturing?
13:44Pure manufacturing because you have manufacturing funds, pure manufacturing I think 8 to 10%
13:48is what one can look at.
13:498 to 10%?
13:50That is what one can look at right now putting in manufacturing fund and at this level again
13:53my way of doing it, if I have to do a lump sum investment, I will do 8 to 10 weeks staggered
13:59investment and if I have to do SIP, that is the right thing to do about it.
14:03Okay, okay.
14:04So viewers, Tiju Manojan doesn't shy away from putting in 8 to 10% into a manufacturing
14:09fund because that seems to be the clear focus, I mean look at defence, look at railways,
14:14look at anything else and there is manufacturing right up there.
14:17So that is an important point that you should keep in mind as well.
14:20Now before we wrap up the show, some queries, it's an important part of our show, let's
14:24get in the first query in.
14:25The query is coming from Kiran, Kiran is 42 years of age and the goal is 1 crore, I believe
14:331 crore corpus.
14:34Now Kiran says Shruthi, sorry I don't know whether Kiran is a he or a she, but I am going
14:39with a she.
14:40So Kiran says that she has a 7000 rupee SIP in 3 funds and wants to invest 20,000 rupees
14:48additionally in monthly SIPs I presume.
14:52Can some funds be recommended?
14:54Current funds are Quant Mid Cap, Quant Small Cap and Parag Parik Flexi Cap.
15:00So good part is that she can step up her SIPs by 20,000, so that worked to be 27,000 almost
15:07and eventually if she can just step up by 3000 more next year because as and when your
15:13income will grow, at 30,000 monthly SIP over next 2 years, if we see that the way things
15:20are going and if her portfolio can grow at 14.5-15%, she can have by the time she is
15:2542, by the time she will be 57 or 58, she can have 2 crore rupees on her side, that's
15:32the power of compounding for you.
15:34A simple rule of 15, it says 15,000 rupees SIP for 15 years at the rate 15% will yield
15:39you 1 crore, if you are doing 30,000 then it can give you around 2 crores.
15:45So funds are little aggressive and it looks good, couple of funds looks good because markets
15:50have done well, my request or suggestion or let's say if I would have been in that place,
15:55I would like to add couple of Flexi Cap or Multi Cap funds which have little inclination
15:59or little more inclination towards large cap side at this level.
16:03So I think that's one should look at.
16:04One can look at a Flexi Cap fund, ICICI Flexi Cap fund also they have good fund, Nippon
16:23Focus is good fund.
16:24So one can look at Mire has a good Focus fund which has not done well although the top holdings
16:30have been good.
16:31So one thing which we always look at the past performance but look at the portfolio which
16:36can do well from here onwards.
16:37As you said before the break also the large cap, many of the large caps are lagging behind
16:42and many of the banking as well as many of the stocks have not got their due as per the
16:46earnings.
16:47So I think once you look at these type of portfolios and just add because you already
16:50have small and mid cap exposure in couple of funds, just add these two, three funds.
16:57And then just very quickly a follow up, for her age at 32 such a risk appetite and aggression
17:02is fair right?
17:05You can be aggressive at this age, maybe you can't be aggressive when you are 60 but at
17:0832 you can be this aggressive.
17:09Yes, so my mistake I thought she is 42, 42 is the new 32.
17:17So I think it's very much she can do this, she can actually add Flexi Cap and Multi Cap
17:22fund.
17:23The problem today is that if you are not in equity that's a bigger problem than being
17:26in equity.
17:27Because eventually if you want to beat food inflation of 700% it's only equity which can
17:31beat that inflation.
17:32Most certainly.
17:33Thanks for that and Kiran you won't mind I called you 32 which is great right?
17:39I shouldn't call you 52 simply put.
17:42The second question is from Suhas Kothari, Suhas is 35 years of age, the goal is a retirement
17:46fund.
17:47I have SIPs and five funds and would like to stop SIP in two of the different funds.
17:54What should I do with the balance amount, move to a different fund via an STP route
17:58or otherwise?
17:59The current investments Shitej are PPFAS, ICICI Multi Cap, HDFC Mid Cap, Nippon India
18:06Growth and Nippon India Small Cap Fund.
18:09Let's keep this on the screen and Shitej now out of these five he wants to stop two.
18:15All funds are good funds, my sense is the more you'll be there in these funds you'll
18:22see multi bagger effect coming in your portfolio.
18:26If I'm not wrong Reliance Growth Fund which is there in that fund?
18:29There's Nippon India Growth yes.
18:31So I think this fund is more than, if I'm not wrong this is the same growth fund which
18:37is more than 2000 NAP, it's gone more than 200 times.
18:40So point here is you have to give time to your investment.
18:43There is no need to stop.
18:44All these funds are good funds.
18:45Just keep on doing, STP is not meant for your monthly investment, it is meant for your lump
18:50sum investment.
18:51If you have some lump sum money coming your way, maybe a bonus, some proceeds from some
18:55land sale, some other thing, then you can do STP.
18:59Otherwise please don't stop your SIP because SIP can actually average out your overall
19:03return.
19:04Let's say if you are expecting markets to fall also you can get some units at a discount
19:08also.
19:09These funds are good.
19:12These funds are in my portfolio.
19:13I would not like to stop myself.
19:17So I think the follow-up is that and maybe I stand corrected, Suhas wants to stop SIPs
19:24in the following funds and needs advice with the current balance number.
19:28So I stand corrected.
19:34If I understand this query correctly, ICICI approved blue chip and HDFC top 100, Suhas
19:41seems to have taken the decision that wants to stop the SIPs in these two funds, assuming
19:48that the decision is taken.
19:51Wants to know what to do with the balance of these funds.
19:53Should he invest in those five funds or should he choose some other fund?
19:57Suhas, the cost of switching these funds is first of all the capital gain.
20:00You are too young.
20:01So you pay 10% capital gain.
20:03If you think that another fund can actually give return which are more than these funds
20:07as well as can take care of the capital gain part, only then switch.
20:10Otherwise just keep the amount in these funds only.
20:14If you want to shift from SIP part, that is understandable that you don't want to go with
20:18the large cap.
20:19You want to have a multi-cap approach.
20:21Then you can have a flexi-cap or multi-cap couple of funds added to your portfolio.
20:24But keep this amount in these funds only because large caps, as you said, as we believe, are
20:29about to do good from here onwards.
20:32Okay.
20:33So Suhas, sorry I botched up the query the first time but I hope you got your answer
20:36now and Shitesh clearly believes that you don't need to.
20:40Also keep in mind, even if you've made a decision that no, you want to, independent of what
20:43Shitesh just said, please do examine the tax aspect that Shitesh was talking about because
20:47when you sell these funds, you will incur a tax liability which you will have to pay
20:52and the balance money goes into some other fund.
20:54So please do consider that when you're making the decision.
20:57Shitesh, take a moment to thank you for joining us in our studios today.
21:00Lovely having you.
21:01Great meeting you.
21:02Thank you for having me.
21:03Thanks for taking the time out.
21:04Thank you very much, Neeraj.
21:05Pleasure was ours.
21:06And viewers, thanks for tuning in to this edition of The Mutual Fund Show.