In a recent conversation with our Senior Correspondent Karishma Gagwani, Anupam Tiwari, Fund Manager - Equities, Axis Mutual Fund spoke about market valuation and India’s growth story. Additionally, he also emphasized the importance of incorporating multi cap funds in investment portfolios.
Here are the key excerpts:
“The key thing is to look at the growth trajectory and not just the valuations.”
In every bull market, there is exuberance and certain things go beyond control but there are also opportunities available. This is across the market and not in a particular segment or sector. The key thing is to look at growth trajectory and not just valuations. If growth comes and sustains for the next three to five years, even at the current level investors can make decent returns. From a valuation perspective, the opportunity to make money in a broader sense is now over. You have to be very selective and opt for only those companies that can deliver growth.
“There is nothing that can derail India’s story.”
Despite the challenges encountered over the last decade, even though not at a higher rate, growth has taken place. We have developed immense capability, world-class companies, great leadership and good talent in various sectors. There is nothing that can derail India’s story but there can be a delay. Growth would be broad-based however global disruptions or significant internal issues could defer India’s growth story.
“Multi cap funds ensure broad market participation at managed risks.”
While many invest in large caps, the propensity of investors in mid cap and small cap is quite low. The last five-ten years show that there has been immense wealth creation in the mid cap and small cap space. Despite challenges faced, these segments have delivered which displays their underlying strength. The combined allocation in large, mid and small cap ensures broad market participation at managed risks.
While theoretically, it is absolutely fine to create a basket of products through independent investments in each market caps, practically it is difficult. Mid cap and small cap are more volatile, and hence making proper decisions at the right time is difficult. Talking about other similar fund categories (flexi cap funds and ELSS funds), the mandated allocation of a minimum of 25% in each market cap, is the key differentiator for multi cap funds. Generally, flexi cap funds and ELSS funds predominately have large cap allocations. It is always better to have a fixed and disciplined allocation, as offered by multi cap funds.
Sustainable long term wealth creation happens only when companies grow. You need to figure out a combination of scalable opportunities and companies that can execute and profit from such opportunities. True to the fund house’s philosophy, Axis Multi Cap Fund invests in businesses which are scalable, capable of generating good profitability, have an excellent track record of corporate governance and are run by competitive management.
You can watch the entire segment by clicking here.
