Nivesh Mitr’s director, Arpita Gupta, spoke to Akhil Chaturvedi on the current market scenarios and recommendations.
Akhil Chaturvedi is the Associate Director & Head of Sales at Motilal Oswal Mutual Funds.
Nivesh Mitr (NM): What is your outlook for 2020?
Akhil Chaturvedi (AC): We feel 2020 will be positive for the markets. This is because we are seeing much better macro-economic conditions like lower crude prices, low inflation, lower CAD, stable interest rates. Add to this, very healthy liquidity from FII’s and DII’s coupled earning growth likely to pick up with improving economic condition and lower direct rates for corporates is likely to have a positive impact on the markets.
NM: Do you expect broader markets to participate in the rally in the coming times?
AC: In the last 6 months, Nifty Midcap 100 Index has delivered 15.44% returns and the Nifty Smallcap 100 index has delivered 15.57% returns as compared to Nifty 50 which has delivered 10.74% returns – so midcaps and small caps have delivered almost 5% outperformance in the recent past. This means that after a period of 18 months, we are seeing that momentum is getting built-in broader set of companies. This is happening because a lot of mid and small companies that performed well on earnings growth in the last two years and not seen price growth (due to absence of buying interest from investors) are becoming attractive in terms of valuations and thus have been rewarded by the markets. On the backdrop of increased liquidity and attractive valuations, the mid and small-cap companies are likely to sustain the positive momentum in 2020 as well.
NM: What is your view on mid & small-cap equities? And do you recommend a lumpsum/ staggered investment (through SIP/ STP)? If staggered, for how long it should be staggered (6 months/ 1 year)?
AC: Yes – we feel that mid and small-cap space has a lot of room to catch up with nifty in terms of performance and hence this space deserves higher allocation to benefit from the upside likely to continue for some time.
Given the current valuation, it may be ok to invest lump sum also, but it is always recommended to stagger equity investments over a period of time to capture any kind of volatility which may arise in near future.
NM: Large-cap funds have seen a great rally in the last 2 years. Is it time to book profits and exit them?
AC: We feel that outside of 15-20 large-cap companies that have done phenomenally well in the last 2 years there are still a lot many large-cap companies where there is still a lot of value and potential of good upside. However, if someone has made extraordinary returns in large-cap space by being lucky to be allocated in the companies/ funds in the past 1 or 2 years, then, in that case, some reallocation to mid and small-cap space may make sense.
NM: What is your recommendation to a conservative investor/ new investors with no past experience in mutual funds, with long term time horizon? Is it still good to make fresh investments in large or multi-cap equity mutual funds?
AC: As a new investor, always start with multi-cap funds rather than second-guessing whether large-cap and midcap would do good. Muticap funds have the mandate to go overweight/ underweight across large/ mid and small-cap as per the discretion of the fund manager upon his or her view on valuations in each of the market cap. Net-net, the rebalancing work is done by the fund manager and investors tend to have a smooth and comfortable journey along the way.