- Interest rate hike coming to an end
- Got a good return of 12 to 15% in equity
Mumbai: Tata Mutual Fund, a mutual fund of the prestigious industry conglomerate Tata Group, holds a leading position among the old fund houses of the country, providing superior returns through its various investment schemes over the past 3 decades. I have created wealth for millions of investors. That is why today it is trusted by more than 28 lakh investors. Now Tata Mutual Fund has launched a new open-ended equity scheme Tata Multicap Fund, which will remain open for initial investment till January 30, 2023. On issues related to new multicap funds, equity market and economy Tejas Gutka, Fund Manager, Tata Mutual Fund (Tajas Gutka) had a detailed discussion with Navbharat’s commercial editor Vishnu Bhardwaj. Tejas Gutka with an experience of 15 years is considered one of the successful fund managers in the country. Here are the highlights of the discussion:-
- Why have you chosen the multicap theme in the current volatile environment?
Multicap is a very good Investment Theme. In this fund, we will create a balanced and diversified portfolio by investing in quality stocks of all the three types, Large, Mid and Small Cap. As per the rules of market regulator SEBI, minimum 25% and maximum 50% investment has to be made in a segment. In this way, 75% of the total investment becomes in all the three segments of the multicap. The remaining 25% is invested by looking at market opportunities. The best thing about the multicap category is that investing in all the three segments creates a risk-adjusted portfolio and benefits from all market cycles as different segments move at different times in the market. Huh. In this way, the evergreen theme of multicap investment can be called.
- Which segments are currently looking better on valuation basis and what would be your investment ratio in Multicap Fund?
The ideal portfolio that we would build from a long term perspective in a multicap fund would have roughly 40 to 45% in largecaps, 30 to 35% in midcaps and 25 to 30% in smallcaps. And when investing, it can be done more or less according to the circumstances of that time. By the way, in today’s situation, we are liking largecaps and smallcaps more because the valuations of largecaps and midcaps are almost equal. That’s why it would be more correct to invest in largecaps.
- If a retail investor wants to make good returns by investing in multicap, then for what period should he invest?
If you want to get good profit in any equity fund, then investment should be kept for at least 3 years and the longer the term is kept, the more is the possibility of profit. On the same lines, it would be more correct to invest in multicap funds for a period of 3 to 5 years. In 3 years, all the three segments and every cycle of the market get benefited and good wealth is created.
- The Indian stock market was an outperformer compared to other markets for the last two years, but has been an underperformer since the beginning of 2023. What is the reason for this and how much further decline can come?
As you said, in the last 2-3 years the Indian stock market was a huge outperformer and gave good returns, but due to this India’s valuation premium had increased a lot. In this situation the market falls rapidly. Although the good thing is that there was no sharp decline in the Indian market. The market has turned sideways. The relative valuation of the Indian market will gradually become attractive if it continues to underperform. Then India will not be very expensive for foreign investors (FII). Although there is no possibility of much decline because India’s growth and fundamentals are better than other big countries and with the meaningful steps of the government, good growth is expected for the next 2-3 years as well. But it would be appropriate to expect single digit returns in 6 to 8 months.
- Record inflation and rising interest rates were major concerns last year, which are now being overcome by falling commodity prices. Do you think interest rates will continue to rise?
No, now there is no possibility of increasing much. The Reserve Bank can increase marginally once or twice. After that interest rates are expected to peak out. Then investment in the equity market will start increasing again. Now commodities and other raw material prices have come down. Due to this, the profit margin of Corporate India will also start increasing again.
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- Investment in FDs is on the rise due to increase in bank FD rates from 5-6% to 7-8%. So would it be right to invest in equity now?
This always happens in the short term, when FD rates go up, investors get attracted. But only 5 to 8% fixed return is available in FD. However, we believe that an investor should always create a balanced portfolio by investing in equity, debt or FDs. But historically, Equity Funds have given good returns of 12 to 15% in the long term and created good wealth. Therefore it would be right to invest in equity to create wealth.