PPFAS MF is one of the fastest growing fund houses in India. Apart from fund performance, what's attracting new investors to the fund house?
Apart from the performance of our fund, I think our investment philosophy and approach is something which is liked by a lot of investors. Also, the communication from our fund house has been exemplary in its degree of transparency.
Besides, we also hold Annual Unitholders Meets - perhaps, the only fund house to do so - and permit unitholders to scrutinise us via pointed questions on various aspects.
Also, our limited product basket - with each scheme offering a finely etched proposition - creates less confusion for investors and increases their comfort and confidence in us.
Valuations have been one of the biggest concerns for equity investors for over a year. Now that the markets have corrected significantly, how comfortable are you with the valuations? Should MFDs recommend lumpsum in equity funds now?
I would differ a bit. Market has not corrected significantly. 10-15% corrections in equity markets are very normal and investors should consider it as a feature of equity funds. The valuations look very reasonable at this point in time. We have been suggesting investors to taper down their return expectations. The last couple of years have been abnormal and this may not continue in the future. Also, try and expand your time horizon since there may be a lot of volatility in between and having time on your side definitely helps to ride that.
There is a perception that ELSS is just for tax saving. Do you find it justified? If no, what other purposes can ELSS serve and when and who should invest in them?
No. Sometimes these funds are under the category of ELSS but they do what a normal equity fund does. Equity investments are for a long term (say 5 years+) and a 3 year lock-in period in ELSS funds should not deter investors from investing in it. Sometimes this lock-in period actually helps the investor in maintaining discipline and not exiting the investment just when it is the wrong time to do so. Taking tax benefit under 80-C is an additional benefit that it offers but our tax saver fund should be considered as an India-centric equity fund.
The Parag Parikh Tax Saver Fund is among the top performing funds in the category. What factors have led to this outperformance?
The investment philosophy, stock picking ability, patience and discipline have been key to this outperformance. We have stayed in cash for about 2-3 years now given that we were not able to find attractive opportunities and we hope that the market will give us an opportunity soon to deploy this cash. Some of the non-lending plays (or platform companies) and midcap technology companies (which we exited a few months back) have done well for us. We have stayed away from the cyclical sectors and companies with huge debts on their balance sheet.
PPFAS MF is known for its distinctive investment approach. What according to you makes the Parag Parikh Tax Saver Fund stand out from the rest in the league?
As you said, we have a very distinct investment approach and we have followed that same approach over the years. In the tax saver fund, despite a 3 year lock in for the investors, we have stayed in cash when we did not find attractive opportunities and that has helped us during these tough times.
At present, the Parag Parikh Tax Saver Fund is overweight on financials, technology and automobiles. Why are you still bullish on these sectors?
In financials, we have allocation towards both lending as well as non-lending (stock market plays like exchanges, depositories, brokers and AMCs). Post the first lockdown, we felt that the NPAs and provisioning for the lenders would rise and hence we went underweight banks last year. Over the past few months, we have increased the allocation towards these banks mainly due to the provisioning cycle being behind them and we are hopeful of the credit growth picking up in the near future.
Technology was one sector which benefited a lot from the COVID and the shift towards technology in each of the sectors was really rapid. There is no doubt that there is huge demand but the supply side issues like employee salaries & attrition as well as the valuation especially in the mid cap space is something which we are wary of.
Automobile sector has gone through a rough patch for the past few years due to raw material pressure, demand remaining soft as well as threat of Electric Vehicle disruption. We feel that all the negatives are priced in at this moment and demand pick up should happen soon. This sector could be a dark horse going forward.
What would be your suggestion to equity fund investors amid heightened volatility and uncertainty due to geo-political issues and expected change in interest rate cycle?
Some rules of investing are cast in stone and they do not change much. Every investor needs to have an asset allocation in place and then invest based on it. Volatility is a part and parcel of equity investing. For any short term needs, it is better to have a debt allocation. For long term and flexible goals only, you can have allocation to equity funds. Corrections in equity markets are very normal. Last 2 years have been a one way ride post the COVID fall and many new investors have come in this time frame. It is important for these new investors to learn from this correction and have an optimal allocation towards equity funds.
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Disclaimer: Investors are requested to note that the above views expressed basis on interview questions only. Investors should not consider the same as investment advice by PPFAS Mutual Fund. Please consult your financial advisor for more detail for financial planning.
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