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What is your medium-term outlook on equity markets?
The medium-term outlook for India looks promising on a global front. The country is poised for high growth and has the potential to become the third-largest economy by 2030. Currently, the GDP is in upward trajectory and Indian companies are strengthening their position in the global market. As a result, we expect an increase in Foreign Direct Investment (FDI) and Foreign Institutional Investor (FII) in the Indian market, thereby pushing GDP growth.
Equity markets are touching new heights. What should MFDs tell their clients?
For those looking for a medium to long-term investment horizon of 3-5 years, equity asset class seems a sensible choice. Equity offers the potential for faster capital growth through compounding compared with the compounding of fixed income. The right mix in asset allocation is key to maximizing returns and managing risk effectively in the portfolio.
What does the sharp fall in equity markets in the last week indicate? Is it the beginning of a bear market?
The market has a natural tendency to be volatile and in the past 12-18 months, we've witnessed some corrections. However, it's important to note that these corrections don't necessarily indicate a shift towards a bear market. We believe India should do well in the medium to long term and the current downward movement is unlikely to lead to a bear market.
While Motilal Oswal Mutual Fund has been around for over 13 years, the fund house has only recently launched its large cap fund. Why this fund now?
We believe it is a good time to invest in large-cap funds. The upcoming elections are anticipated to be a key trigger in attracting FIIS to India. Notably, around 80% of FII investments are typically directed toward large-cap sectors. With increased FII inflows expected, it is foreseen that large-cap segments will experience positive performance.
There are many large cap funds in the market. Why do you think MFDs should recommend Motilal Oswal's large cap fund?
Our large cap fund stands on three pillars: High active share, conviction and an equal-weight portfolio.
Active share is a percentage of portfolio that has no overlap with the benchmark. We will maintain 60-80% of active share in our large cap fund.
Conviction is investing only in a concentration portfolio of high-quality companies. We will be having 30 stocks in our large cap fund as against average holding of 58 stocks in peer group.
Finally, we will follow equal weight portfolio to construct the portfolio i.e. maximum weight of a stock will be 3.3% compared to peer group average of 9.3%.
This combination of high active share, conviction and equal-weight portfolio is designed to deliver consistent outperformance while maintaining a well-balanced and strong investment portfolio.
AMFI data shows that majority of large cap funds are not able to beat their benchmark. As a result, many investors prefer passive funds for large cap allocation. What is your view on this?
The fund sizes in the category have grown large and have started to adopt a closer indexing approach. It's important to note that with closer indexing, generating alpha becomes challenging.
Large cap universe is dominated by financial and technologies sectors. In such a situation, how do you plan to offer sector diversification in this space?
Our objective is to identify better businesses and stocks within each sector, aiming to derive alpha. We want to have aligned exposure to various sectors and consider factors such as style, quality, growth and value and aim to consistently deliver strong performance. Due to this approach, we will be able to deliver performance consistently.
