The Mutual Fund Show | All About Edelweiss Technology Fund | NDTV Profit - video Dailymotion

NDTV Profit

- Investing in tech funds - Are U.S. tech stocks overvalued?   Alex Mathew speaks to experts on 'The Mutual Fund Show'.    Guests:    Trideep Bhattacharya  CIO-Equities, Edelweiss MF   Shweta Jain Founder, Investography    Vishal Dhawan Founder & CEO, Plan Ahead Wealth Advisors     --------------------------------------------------------------------------------------------------------------------- For more videos subscribe to our channel: https://www.youtube.com/@NDTVProfitIndia Visit NDTV Profit for more news: https://www.ndtvprofit.com/ Don't enter the stock market unaware. Read all Research Reports here: https://www.ndtvprofit.com/research-reports Follow NDTV Profit here Twitter: https://twitter.com/NDTVProfitIndia , https://twitter.com/NDTVProfit LinkedIn: https://www.linkedin.com/company/ndtvprofit Telegram: http://t.me/ndtvprofitnews

Transcript

00:00 [MUSIC PLAYING]

00:03 Hi.

00:08 Thanks so much for joining in.

00:09 You're watching the Mutual Fund Show on NETV Profit,

00:12 and I'm Alex Mathew.

00:13 This show gets you actionable insight on everything

00:16 mutual fund related, whether it is deciding

00:18 your overarching strategy or reviewing

00:21 whether you're invested in the right schemes.

00:24 On today's program, we'll start with a chat

00:26 on Edelweiss Mutual Fund's newest offering,

00:30 and that is their tech fund.

00:31 We'll discuss how they're planning their portfolio

00:33 strategy and what the objective is.

00:36 We'll then delve deeper into investing in tech strategies

00:40 overseas through mutual funds.

00:43 There are regulatory restrictions in place.

00:46 So which schemes should you look at?

00:48 All of that and more today.

00:50 But first, let me introduce you to my guest at the start.

00:54 And we've got Sriddhi Bhattacharya, Chief Investment

00:56 Officer of Edelweiss MF, joining in.

01:00 Sriddhi, thanks so much for taking the time,

01:02 and pleasure speaking with you as always.

01:04 Your NFO starts today.

01:07 Talk us through the idea behind it,

01:10 and we'll delve a little deeper into the planned portfolio

01:13 construction then.

01:14 Sure.

01:15 First of all, thanks for having me in your very popular show.

01:18 I would say that overall, one of our thesis or thinking right

01:25 now is that the global growth actually will bottom out this

01:29 year and will rebound next year.

01:32 And as a play on rebound globally next year,

01:36 this year could be a good year to accumulate

01:39 thematic portfolios like technology, which is ultimately

01:43 a play on global earnings.

01:45 And when we think about technology,

01:48 we obviously think about technology

01:50 in the Indian context in a broader way, which

01:52 is Indian IT services companies and also the new age companies.

01:56 And we also combine this with some of the global tech leaders

02:00 to get access to those technologies like AI

02:04 and a few others, which are mostly on the B2C domain

02:07 and not available in India.

02:08 So as a concoction, the fund that we

02:10 are talking about in the form of Edelweiss Technology Fund

02:13 gives investors an exposure to not only Indian IT services,

02:18 plus the newest technology companies,

02:21 but also global industry leaders.

02:24 And hopefully, that is positive from an investor portfolio

02:28 standpoint over time, both cyclically,

02:31 given the global rebound that we think might happen next year,

02:34 and also structurally as technology penetration

02:38 across different industries is growing rapidly

02:41 and will likely grow even further going forward.

02:44 Now, when we get into the construction

02:47 or the proposed construction of this portfolio,

02:49 Tradeep, as I understand it, it's

02:52 going to be 70% to 80% Indian stocks and 20% to 30%

02:57 foreign stocks within the S&P 500 universe.

03:01 How is this going to work?

03:03 How is this dynamic going to work?

03:05 I think basically, the 70-30 mix is just about the right one.

03:10 And the reason I say so is keeping it, of course,

03:14 within 30% or within 35% gets us the equity taxation.

03:20 And hence, that is beneficial from an investor standpoint.

03:24 Secondly, I mean, overall, if you look at--

03:28 while Indian companies are mostly B2B dominated,

03:32 our customers are mostly businesses,

03:36 the US technologies, which is now US technology

03:39 stocks, which are mostly seen as a proxy for the rest

03:42 of the world tech, are mostly B2C dominated.

03:45 So this combination of 70-30, call it,

03:49 gives the investor a right mix of B2B and B2C,

03:52 right mix of India as well as global,

03:54 and just about serves right from the taxation perspective.

03:59 So that's the best that we could package in one fund.

04:03 Now, if I look at the themes that would fall under tech,

04:07 it's quite wide ranging, all the way from generative AI

04:11 to fabricators.

04:14 I'm talking about semiconductors and chip designers as well.

04:18 And all of those are themes, Tridib,

04:20 that have run very well over the last several months.

04:23 The question is, we're launching now,

04:26 and we're looking at a fund that is

04:28 looking to benefit from these developing themes.

04:34 The question that some people will ask

04:36 is, is that potential currently in the price?

04:39 And are we buying at elevated valuations?

04:43 I think, good question.

04:45 So I will say that overall, first of all,

04:49 the economic situation in the United States globally

04:52 is not particularly great.

04:53 We all know that.

04:54 And hence, tech as a play on global earnings,

04:59 particularly from a B2B standpoint,

05:01 haven't really, hasn't really done well.

05:03 So if you look at, for instance, the Indian tech sector,

05:06 it has underperformed the broader market

05:09 by at least close to about 20% over the last couple of years.

05:14 And that makes the starting valuations

05:16 for Indian companies or tech companies

05:18 overall in general, relative to their own 10-year average,

05:23 reasonably attractive.

05:24 That's number one.

05:25 The second point I would say that overall

05:28 from a global standpoint, some of the trends

05:32 that we are talking about, like you mentioned,

05:34 artificial intelligence, robotics, internet of things.

05:38 And likewise, these are actually decadal things.

05:41 They don't go away in one or two years.

05:43 And hence, I would suggest that these are more

05:47 structured in nature than otherwise.

05:49 And hence, taking an exposure to these things

05:53 would actually benefit investors over a long period of time.

05:57 And we are suggesting those investors

05:58 to invest in this fund who have an outlook for about 5

06:01 to 10 years.

06:02 So I would actually think this serves a very good purpose

06:05 for investors who want to take exposure to Indian IT

06:10 services, Indian technology names, which

06:12 have lacked the broader market and have still

06:14 decent valuation support.

06:16 And at the same time, want exposure

06:18 to some of the global technologies

06:20 like artificial intelligence, robotics, IoT,

06:23 which have a shelf life of at least more than 10 years

06:27 and are more structured in nature.

06:30 So I think you're just about at the right time, if you ask me.

06:34 No, and it's an important clarification

06:36 to make because I think a lot of people

06:37 today jump into tech or other thematic funds in general,

06:42 thinking that they can ride the wave of something that

06:46 is playing out and make a quick buck.

06:48 But then what you're saying is that this

06:50 is a thing that you anticipate will play out

06:52 over the long term.

06:53 And so you should have a five-plus-year time horizon.

06:57 And it's important to make that clarification.

06:59 I also want to understand, there are restrictions

07:03 that are in place currently for the industry with regard

07:06 to investing in overseas equities.

07:10 How is that going to constrain you, if at all?

07:15 So at some size, probably, it probably does.

07:20 So the starting point is at the moment,

07:22 with regards to our own overseas offerings and likewise,

07:26 we do have space within the industry prescription, which

07:31 is within the limits of what we have already invested,

07:35 given the redemptions that are in some of the other places.

07:38 So we have a bit of space within our existing limit

07:42 to participate globally.

07:44 And mind you, the global component

07:46 is just about 20% to 30%.

07:48 So from an overall fund standpoint,

07:51 we can scale up meaningfully before even thinking

07:55 about violating or hitting those constraints overall.

08:01 Understood.

08:02 So on net balance, we are not worried about that.

08:04 Understood.

08:06 I'm just trying to understand how far you will go.

08:08 Now, you've said US S&P 500, which is, in fact,

08:13 quite a large universe just as it is.

08:16 Are you restricting yourself at all to the very large players?

08:20 And we're talking about something like an Apple.

08:23 And I'm sure that some of my viewers are aware of this.

08:26 You would look at the market capitalization and say,

08:28 hey, you know what?

08:29 The Indian stock market is comparable.

08:30 So therefore, are you looking at the very large companies?

08:34 Are you willing to go broader as well?

08:37 So I think it's a good question.

08:39 And the first thing is, what we are looking to do

08:43 in taking exposure to US stocks is using US as a proxy

08:47 for global technology.

08:49 That's the first point that I would make.

08:51 If you look at Indian technology companies,

08:53 they operate at one subsegment of tech,

08:55 which is mostly operated one segment of tech,

08:58 which is IT services.

09:00 The other areas like semiconductors, hardware,

09:03 components, AI, and areas like these,

09:07 which are more B2C in nature, are not available in India.

09:11 And that's what we are looking to explore.

09:12 That would be the second part that I would highlight.

09:15 The third I would highlight is that when we are looking

09:18 at S&P 500, it is mostly the universe

09:22 that we are talking about, that the universe is S&P 500.

09:25 Actually, within the S&P 500, we are looking at companies

09:28 which fall under technology domain.

09:30 And within that, we are probably going to limit ourselves

09:34 to the top 50 names.

09:35 So yes, we would be kind of looking at the larger cap names

09:40 overall in the global scheme of things.

09:43 But at the same time, those are the guys

09:45 who are benefiting disproportionately

09:48 from the emerging trends, because the big gets bigger,

09:52 particularly in the context of technology.

09:54 And I mean, one can only look at how Amazon has grown

09:57 or how some of the other global names have actually grown

10:00 over a period of time.

10:01 And these are just example, not stock recommendation.

10:03 But net-net, the US component would be managed

10:06 in a more rule-based manner, as you are showcasing,

10:10 it will be balanced on a quarterly basis.

10:13 But it will be the subcomponent of technology,

10:15 part of S&P 500.

10:17 So it'll include some large caps or some mega caps,

10:21 some large caps, but certainly not global small caps

10:25 or thereabouts.

10:26 It will be the larger caps ones which will be exposed to.

10:29 - Understood.

10:30 Sridhi, the last question, and that relates to the timing.

10:33 We're speaking on a day when we've just had the CPI print

10:38 in the US.

10:39 It is not what people had anticipated to say the very least.

10:43 And you've seen a reaction across the board in risk assets.

10:46 The question is, if we do have the rate cuts now pushed

10:51 down the road, one would only assume that the landscape

10:54 for at least the Indian IT services does not look too rosy

10:59 for the next three to four months or thereabouts,

11:02 at least half a year, right?

11:04 Is that something that you're factoring in?

11:06 Is that a risk that you need to bear in mind?

11:09 - I won't say so.

11:12 One of the golden rules in investing is,

11:15 invest when there is a famine outside and take profits

11:20 if there is a feast all across.

11:23 So when global data points are contrary to the fundamentals,

11:27 you get share prices, which are available at valuations,

11:31 which is worth looking at.

11:33 And I would agree with you that overall in the very near

11:37 term, IE three to six months, we don't think that

11:40 the fundamentals will change dramatically

11:42 in the positive direction.

11:44 And hence I said that overall, we think that this year,

11:48 calendar year 24 is the year when investors should gradually

11:53 accumulate exposure to the sector via our funds,

11:56 because we think come CY25, the next calendar year,

11:59 you would start seeing recovery coming through.

12:02 And as a play on that, things would improve.

12:03 So yes, delaying of rate cuts does sort of delay

12:13 the immediate improvement, so to speak,

12:15 but then that's when you get the best valuations to invest

12:20 from a share price standpoint, which is the seed

12:22 for future returns for investors over time.

12:25 - I'm glad that you said that.

12:28 Thanks so much, Sridip for joining us

12:30 and for having this conversation with us.

12:31 Pleasure speaking with you.

12:33 - Thank you very much.

12:34 - And joining me now, we've got Shweta Jain of Investography

12:38 as well as Vishal Dhawan, who is the Chief Executive

12:42 Officer of Plan Ahead Wealth Advisors.

12:45 Thank you so much to the both of you for joining in

12:47 and for agreeing to speak to me on this.

12:50 We were speaking about tech funds and we were speaking

12:54 with Edelweiss MFCIO about their latest offering.

12:58 So I want to start by asking you Vishal,

13:00 about what you make of tech funds in general.

13:03 There are a few available right now, and one would think,

13:06 and what his point was, is that it's a good time

13:09 to accumulate now because the sector is not essentially

13:12 at least in India, firing on all cylinders.

13:16 What do you make of it?

13:17 - So there's clearly been this cycle

13:20 that tech has gone through.

13:22 So there was this huge euphoria that came during

13:25 and post COVID with the increased digitization

13:28 that was happening across businesses.

13:30 And then we saw that two events took place.

13:34 One is probably a lot of pre-buying happened

13:38 and sort of overcapacity got created.

13:40 And second is we saw interest rates actually starting

13:43 to move up fairly significantly globally,

13:46 causing discretionary demand to actually come off.

13:49 So what seems to have happened is there is a reversal now

13:51 where you are actually starting to see interest rate cuts

13:54 starting to get talked about maybe second half of 24.

13:58 And you also are seeing that earnings could possibly,

14:01 the degrowth that was happening is probably bottoming out.

14:04 And therefore it may be a good time for people

14:07 to tactically accumulate the IT sector,

14:10 as long as they clearly understand the risks

14:12 of going to a single sector

14:14 because things can reverse very quickly.

14:17 And if they're not adept and quick enough

14:19 and nimble with some of those decisions,

14:22 they could end up getting the wrong end of the cycle.

14:25 - Fair point.

14:26 Shweta, anything to add here

14:27 with regard to tech funds in general?

14:29 And also of course, the Edelweiss NFO.

14:31 - Yeah, so I'm a little wary of thematic funds.

14:37 I'm not a fan of thematic and sector specific funds,

14:41 especially for new investors.

14:43 I think seasoned investors can limit their exposure

14:46 to up to 10%, but for new investors,

14:50 it's a definitely avoid and a no from me

14:53 for the simple reason that their entire experience

14:56 in the future could be driven by this

14:58 and we could drive them away completely.

15:00 So for new investors,

15:01 I would say stick to your diversified funds,

15:06 get the boring returns and experience first

15:09 and then you can look for a little bit of a thrill

15:12 a little later once you're experienced investing in equities.

15:17 - Okay, fair point.

15:19 I'll come back to you, Vishal, on this next one,

15:21 which is that there are restrictions

15:23 that have been in place for some time now

15:26 that restrict mutual funds

15:27 on how much they can buy in the overseas market.

15:30 Could you explain that to us

15:33 and how that's changed the functioning of schemes

15:36 that are currently operating?

15:37 - So, there is sort of a reasonable history now

15:42 along this sort of constraint

15:45 that domestic money managers have had

15:49 when they've tried to allocate money

15:51 to invest internationally.

15:53 There was a limit of about $7 billion available for funds,

15:58 which once upon a time seemed like a very large limit.

16:01 And then there was also $1 billion available

16:03 for ETF purchases.

16:06 And that limit unfortunately got breached

16:09 either because there were

16:11 sort of specific international funds.

16:14 So there were funds that were combinations

16:16 of domestic and international stocks or ETFs,

16:20 which also started to hit that limit.

16:22 So there was a point in time

16:25 where virtually all inflows into these got stocked

16:29 until you had this big correction

16:30 that happened through 2022.

16:34 And therefore in the middle of 2023,

16:37 you actually had a point where

16:38 because of mark-to-market reductions that had happened,

16:42 there was an additional window

16:43 that got opened up to buy internationally.

16:45 So clearly those investors who are looking

16:47 to buy internationally through a domestic mutual fund

16:50 are still constrained

16:52 because they don't have the entire suite

16:54 of products available.

16:55 There are some available

16:58 and even within those which are available,

17:00 there could be nuances of some allowing lump sums,

17:03 some allowing only SIPs,

17:06 some allowing STPs as well, but not allowing it.

17:08 So there is a fair amount of complexity

17:12 when one wants to do this.

17:14 In contrast, if one wanted to use the LRS route

17:17 to invest internationally,

17:19 besides things like TCS, et cetera,

17:21 that they have to worry about,

17:23 the suite of options available is much more.

17:27 - Before I hand it over to Shweta to ask the same question,

17:29 I want to ask you as well,

17:31 what are the schemes that are currently available

17:33 that are open for investors to put money in

17:36 that also play that tech theme?

17:38 Since we're talking about domestic funds

17:41 that invest overseas.

17:42 - So broadly there are three

17:45 that you can classify them into.

17:46 One is those which are purely tech funds.

17:50 So those funds are like the Invesco QQQ fund.

17:55 You have the Edelweiss US tech fund.

17:59 Those are pure sort of technology funds

18:02 that allow you to get there.

18:04 Then you have these funds which are sectoral tech,

18:07 but could have international exposure as well.

18:10 For example, if you go to Franklin India tech fund,

18:12 it allows you to buy 80% local and 20% global.

18:17 A lot like the Edelweiss one,

18:20 which is doing a 70/30, for example.

18:23 And then you have these very broad based funds

18:26 which could either be buying the indices internationally,

18:30 like the S&P 500 from Motilal

18:33 or the HDFC developed world index,

18:36 or you could have the Franklin US opportunities type of funds

18:40 or the Nippon US equity type of funds,

18:43 which are active funds which have a lot of tech exposure,

18:46 somewhere in the region of about 40%.

18:48 So depending on how one wants to really buy this basket,

18:52 one can choose and pick what is the method

18:54 that you want to run on this.

18:57 - Shweta, you want to comment on this?

18:58 In the tech fund space,

19:00 I know the overarching view is that new investors

19:04 should avoid, but if you are a nuanced investor,

19:07 and I think even the,

19:11 Sridhip from Edelweiss has pointed out

19:13 that you should have at least five years of a horizon

19:15 if you're looking at investing in his fund.

19:18 So therefore, which schemes do you like in this space?

19:21 - So I like the Motilal S&P 500,

19:25 that's a scheme that we've been recommending as well.

19:28 So that's a scheme that one could look at

19:31 from an international sort of tech space.

19:34 From a broader category, of course,

19:37 the PPFAS FlexiCap is something that we recommended

19:41 for a long time now, and that's something that we like,

19:44 because it gives a good combination of four people

19:49 who have been investing for a while

19:52 and can get like a good combination of Indian

19:56 and US sort of exposure.

20:00 If you actually see the portfolio of PPFAS as well,

20:04 you will see that while it's US equities,

20:06 it's predominantly US tech.

20:08 So I think that gives a good exposure

20:13 and a good combination.

20:14 - I'm glad that you brought up PPFAS

20:16 because that's my last question of the day.

20:18 And Vishal, I'm coming to you on this one.

20:21 I have been looking at the portfolio construction

20:25 of this particular scheme for quite a while.

20:27 And we've spoken with the fund managers as well,

20:30 and they've admitted that they've had to let the exposure

20:34 of overseas stocks reduce quite dramatically

20:37 over a period of time.

20:38 It used to be 30% or thereabouts,

20:40 and it's now what, 15 odd percent or thereabouts, right?

20:44 So does this dramatically change the way

20:46 that the scheme has operated in your opinion?

20:49 It has still managed to perform quite well.

20:51 - Definitely has an impact because clearly the,

20:57 you know, the historical sort of view

20:59 that the fund has taken has that wherever

21:02 they do not find opportunities to participate

21:05 in a particular sector or a particular theme,

21:08 or if there are global businesses that are more efficient

21:12 to buy into rather than Indian businesses,

21:14 they will try to allocate capital there.

21:16 So they're clearly constrained by two things.

21:18 One is just the fact that there is this gap overall.

21:21 And second is as a fund,

21:23 they've had a lot of inflows coming in,

21:25 both in the form of lump sums as well as SIP.

21:27 So there has been this sort of tapering down

21:30 of international exposure automatically.

21:33 And therefore I think over a period of time,

21:36 the benefits of the international exposure

21:39 that they have will keep reducing,

21:42 and therefore they will start to behave a lot

21:44 like domestic funds unless those gaps are changed.

21:47 And therefore what investors may wanna do

21:50 is if they think that, you know,

21:52 the structure of what PPFS had once upon a time

21:56 is something that appeals to them,

21:58 then they may wanna look at other alternatives

22:00 who, you know, where domestic and international

22:04 are combined together.

22:05 It makes it a little more tax evasion,

22:07 but more than that, I think if they're looking

22:09 for this combination to come through,

22:12 then they may wanna look beyond PPFS,

22:15 even though PPFS is an extremely good scheme.

22:17 - Okay, fair point.

22:19 And, you know, I would think that that holds true

22:22 for certain other schemes also

22:24 that have traditionally had high exposure

22:27 and have had to change.

22:28 Not many to speak of because the size

22:30 is what also matters, right?

22:32 But both of you all, Shweta as well as Vishal,

22:35 thank you so much for joining in

22:37 and for breaking down this particular subject.

22:40 Of course, tech is going to be in focus

22:44 going down the road as well,

22:45 and we will have to revisit it at some point.

22:48 In the meanwhile, if you've got questions for us

22:50 about this particular topic,

22:52 or in fact, anything else related to rather mutual funds,

22:56 you can send them to us on the WhatsApp number.

22:58 Of course, we've got a few questions as well,

23:00 and we will take them up starting tomorrow.

23:03 Do stay tuned, lots more coming up

23:04 over the course of the day,

23:06 and this is "NDTV Profit."

23:07 (upbeat music)

23:10 (upbeat music)

23:13 (upbeat music)

23:15 (upbeat music)

23:18 (electronic music)

The Mutual Fund Show | All About Edelweiss Technology Fund | NDTV Profit

Category

Transcript

Recommended