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00:00Welcome, you're watching the Mutual Fund Show.
00:08I'm Tamannaah Namdar.
00:10This is your one-stop destination for all things mutual funds and your investments.
00:14Now, the topic we're taking today is one which I think is the talk of the entire equity space,
00:22which is IPOs.
00:23There have been a whole host of IPOs coming in, more lined up in the future, and a lot
00:31of mutual fund investors are possibly even applying for IPOs in their individual capacity,
00:37but that's not what we're focusing on right now.
00:39We're talking about mutual funds and their growing participation in IPOs.
00:45How do you know if you are getting the best of the primary market through your mutual
00:52fund investment?
00:53In fact, do you have a better chance of getting a slice of the pie through a mutual fund rather
01:00than individually applying?
01:02Because think of it this way, with record SIP inflows, mutual funds also need more destinations
01:09for that money, and they have invested over 6,900 crores in eight IPOs this August alone.
01:18Let me repeat that, 6,900 crore rupees in eight IPOs this August alone, making it the
01:24largest primary market fundraising since May 2022.
01:28From major anchor investments in Brain Bee Solutions, Ola Electric, and Premier Energies.
01:34We'll explore what that means for investors and the mutual fund landscape.
01:37Of course, we don't have the figures for Bajaj Housing Finance, but that would be interesting
01:41to see as well.
01:42I'm speaking today with Aditya Nain, author, professor, and creator, and Santosh Joseph,
01:47founder of Germinate Investor Services, for more on this.
01:50Welcome to both of you, and great to have you on the show.
01:52Aditya, let me begin with you, and first of all, let's get back to the basics.
01:58Is it a good idea for mutual funds to look at primary issues and the primary market?
02:02Samana, thanks for having me on the show, firstly.
02:07I guess why not, right?
02:08Because look, if you're going to invest in an IPO, you'd rather do it through a mutual
02:12fund than as an individual, because I think they have a clear game plan as to why they're
02:17investing in the IPO.
02:19Are they investing in it for, you know, quick listing gains, which would usually not be
02:22the case?
02:23Or are they investing it for long term capital appreciation?
02:27Which means they've done their due diligence, they've done their research on the stock.
02:31And as India's equity markets increase, retail participation does increase.
02:35Mutual funds, as you said, are going to look for various avenues to park that money, especially
02:39at a late stage of the bull market that we probably are in today.
02:45The market is flooded with IPOs, because, you know, this is the time of the market when
02:48IPOs do well, lots of money flushing around.
02:52And so they need a home to find for themselves.
02:54I'll tell you why I'm asking that question, Aditya.
02:58And yes, of course, why not is a fair enough answer.
03:00But I'm asking it from this point of view, and I'll take it to Santosh as well, that
03:04a lot of experts, financial advisors say that IPOs are not the best investment.
03:12Get the stock list, see how it's doing, come to a fair value, and then enter.
03:17That's when they're addressing individual investors, won't the same stand for mutual
03:21funds?
03:22Yeah, so I think with mutual funds, the added advantage that they have is their portfolio
03:27sizing is a lot more deliberate than retail investors.
03:31So you know, a fund is not going to put 50% or 30% of their assets in an IPO.
03:36They're going to put a small amount, in any case, because look, IPOs are small cap companies
03:41at the end of the day, because they're new.
03:43So a large, let's say, FlexiCap is not going to have that much allocation to Medosmallcap
03:48in any case.
03:49And from that Medosmallcap allocation, they're not going to have that much to recently listed
03:54IPOs further.
03:57So I think that takes care of the issues.
03:59Of course, this also depends on the management style of the fund, right?
04:03Some management styles or managers are a lot more conservative.
04:06They'll take the Warren Buffett approach that let the stock find its price, which makes
04:11sense as it is.
04:12And I don't invest personally in IPOs, but I feel a lot more comfortable if there's a
04:17management team that's actually taking the decision.
04:20And so I don't feel it's a no-no on the mutual fund side.
04:23Santosh, let me come to you on that point.
04:25And before we get into how to maximize your mutual fund investment, if you want to tap
04:30the primary market as well, and we'll get to that in a bit.
04:32But at the core of it, because mutual funds have been, you know, very significant participants
04:40in the primary market as well.
04:42Sometimes those bets work, sometimes they don't.
04:43And at the end of the day, they're custodians of investors' money.
04:48Do you think that there's a bit of exuberance in the way mutual funds are also participating
04:51in primary issues?
04:53Santosh, I have questions for you.
04:59Yeah.
05:00I think the markets generally are exuberant right now.
05:02Now, whether we talk about IPO valuations being high or even the regular secondary market,
05:08the IPOs valuations being high, irrespective of the IPO pricing.
05:11I think for the mutual fund, the most important aspect is they have to consider the supply
05:15that's coming into the market for businesses, whether they are traditional businesses or
05:20new age businesses, whether the business is raising capital by offer for sale or they're
05:24raising capital because they want to grow the business or the promoter selling stake.
05:30The question of exuberance comes in is when you feel that everything is expensive, both
05:35the IPO and the non-IPO, and then you do not know where to deploy the money.
05:40But here, there are also new age businesses that do not exist already come into play.
05:46And therefore, in the month of August, when you saw this data, both for IPOs and the monies
05:50that went into IPOs from mutual fund, there were also these new age businesses which we
05:54do not have essentially a great reference point for.
05:58They are businesses which are highly scalable, highly profitable, away from the regular businesses
06:02that are already available.
06:03So using the mutual fund vehicle for regular investors to participate in them is a great
06:09idea. And I don't think one can just look at it as exuberance.
06:13And I think we also have to understand that, you know, mutual funds participating in IPOs
06:17is better off for retail investors at least to choose which one to participate in and
06:21which one not to.
06:22And I think another point that you can add is that regular retail investors better positioned
06:28through a mutual fund to get some allotment into the scheme than they're trying their
06:32luck because, you know, today winning an IPO allotment is more difficult than even winning
06:37the lottery.
06:38Yeah.
06:39Okay.
06:40So that may improve your chances, definitely.
06:43Now let's look at it this way, Santosh.
06:45If you want to make the best of primary market and a lot of exciting IPOs are lined up as
06:53well for the rest of the year, how can you maximize that through your mutual fund investments?
06:58Obviously, you'll, you know, you'll apply for those issues if you wish to.
07:03All of that is on one side.
07:04I'm not talking about that.
07:06But in terms of mutual funds as a vehicle, how best to maximize it?
07:11So mutual funds have actually been extremely efficient already in terms of maximizing the
07:17opportunities as far as IPO participation by mutual funds and therefore giving the end
07:23retail investor that exposure.
07:25Now the quality of fund that you select, either thematic or sectoral or larger diversified
07:30funds will actually depend on whether that scheme will even apply.
07:34Now today, you know, you have funds which you have even dedicated mandates to say I
07:39will invest in the IPO markets either during IPO or immediately after IPO.
07:44Again, then when you look at a lot of small cap and mid cap funds, in fact, most of the
07:49IPOs that happen, you'll notice are small cap and mid cap funds.
07:52They have the ability to aggressively participate and sometimes even get the allotments done
07:57in the qualified segment part.
08:00So choosing a fund which you feel is most likely going to participate in IPOs is going
08:05to benefit the investors, going to benefit the scheme, objective of what the scheme wants
08:10to generate.
08:11The bottom line is, we have to consider the IPOs that are there and the scheme that you're
08:18investing.
08:19If the mix goes well for in both the cases, then the investors benefited.
08:23And we believe that mutual funds will take a better decision than the retail investors
08:26themselves.
08:27Okay.
08:28So that comes back to the question.
08:31So which funds?
08:33If someone's watching right now, Santosh, and they want to know, how do I make the most
08:37of it, then give them something a little more specific, which funds should they look at?
08:41Specifically, you already have utilized now for almost four or five years running a fund
08:46earlier called the IPO Opportunities Fund and now it's called the Recently Listed IPO
08:50Opportunities Fund.
08:51Otherwise, I think there is no specific fund that is available.
08:57You have to just play by the mid cap or the large cap or even the team.
09:00Because when you look at the month of August, you have a lot of funds which were in the
09:06new age and in the technology space.
09:08So therefore, a digital fund or a technology fund was more suited to take advantage in
09:14the month of August than any other traditional fund.
09:17So I think that's why you'll notice that most AMCs are now coming out with new age funds
09:22like digital fund or technology fund, because the entire universe of what we call tech and
09:28tech-oriented IPOs are increasing by the day.
09:32OK, I'll take that question to you, Aditya.
09:35Is our mutual funds a good vehicle to maximize allocations, especially in big blockbuster
09:41IPOs? And like Santosh said, sometimes it's like winning a lottery.
09:45So you try and win that lottery, but you maximize your chances.
09:48How do you do it?
09:50So I think the Edelweiss Recently Listed Fund, and as far as I know, there's no competitor
09:54to that, I may be wrong.
09:56It would be your best bet.
09:58It could work well for like a core and satellite portfolio where someone has, let's say, indexed
10:02funds or flexicap funds as their core, but they want to play around a little bit with
10:06a small portion of their portfolio.
10:07They could try something like the Recently Listed Fund.
10:11However, I did take a look at the numbers earlier.
10:13And when you compare that performance, which is the fund essentially is about 50 percent,
10:18mid 50 percent small cap at this stage.
10:21When you compare the performance to just any mid cap or small cap fund, even from the same
10:26fund house, it doesn't really give you that much of an advantage.
10:30So I would rather stay away from it.
10:33But if you really want to go for the IPO play, I think that's your best bet.
10:38Apart from the technology funds.
10:40Which technology funds?
10:43Or should you choose depending on the IPO?
10:47So, for example, if I'm an investor and I want to make sure that I have an allotment
10:52in, say, Swiggy, NSE, Hyundai, these are some of the big ones coming.
10:57How do you position yourself?
10:59And you don't have that much choice, even in the digital or the technology thematic
11:06space. You do have, let's say, the Tata Digital Fund, the ICICI Technology Fund and a
11:11couple of others more.
11:12I mean, and quite a few of them are coming up.
11:14You've had some NFOs in the space as well.
11:17I don't think you can say beforehand that here I want to go with this fund to get the
11:22most advantage because, you know, let's face it, the equity market is still growing.
11:27We don't have, we're not the space where we can say right now this fund is going to
11:31invest in all the upcoming tech focused IPOs.
11:35So you may have fund managers taking discretionary decisions about which ones to
11:38skip over and which ones to go for, which is why, you know, maybe we'll have more
11:42thematic IPO funds coming up, just like we have the Edelweiss one.
11:47OK, so there's an Edelweiss fund which caters to IPOs, but, you know, Aditya makes a
11:53good point. Comparative return doesn't show anything massive coming there.
11:58I suppose, you know, just wait and watch.
12:02Actively managed funds with a good history of astute fund managers is probably your best
12:08bet, because if there's an opportunity, they'll make sure that they are there.
12:11All right, let's get to your queries for the day and the number on your screen, if you
12:15want to write in to us.
12:17Remember, this is the part of the show where we get your questions and our experts
12:20answer them for you.
12:21Shirdinath writes in first, he's 25, says he's been investing through SIPs for three
12:27months. The portfolio consists of 75 percent in equity and 25 percent in debt and gold.
12:35He's seen around 2 percent returns as of now.
12:39I suppose that's overall.
12:43Is it feasible to continue the SIP?
12:46Now, it's just for three months, so a little more patience perhaps expected.
12:50But Santhosh, let me come to you first with that question.
12:52Two percent return in three months.
12:55No, I think we should not even think about the 2 percent or whatnot in terms of returns.
13:00The good part for Shirdinath is SIP is going on.
13:03The asset allocation is fairly good between equity considering the age of the person.
13:08It almost looks like, you know, the 75-25 rule is being maintained between gold and
13:13fixed income as well as equities.
13:18Straightforward answer is please continue the good job that you've started off on.
13:22I think that three months should be well looked after, three years or maybe five years
13:26or 10 years. And then you realize that these returns of 2 percent won't matter.
13:29You may be seeing far better returns than this.
13:32The success in an SIP is to stay as long as possible and maintain your asset allocation
13:39mix depending on your age and risk profile.
13:41But otherwise, nothing to debate or review this, just continue.
13:46OK, nothing to debate and review, just continue.
13:48Aditya, would you agree?
13:50First of all, the 75-25 split makes sense to you?
13:54Yes, it does. I mean, I'm not averse to that.
13:56With someone 25 years old, I'm usually biased towards an all equity portfolio.
14:01My model for that age group would be just keep ploughing as much equity in, especially
14:05if it's an SIP, because over the long term, that's probably going to outpace the other
14:09asset classes. But, you know, 75-25 is a good allocation.
14:13You know, it's 2 percent up today.
14:15It could be 5 percent down tomorrow.
14:16You know, just turn off that app, check it maybe twice a month and a couple of months
14:21is nothing. I know, you know, I really feel for new SIP investors because they want to
14:25see quick returns. But the name of the game for you right now at age 25 is to accumulate
14:30as much as possible.
14:31So instead of stopping an SIP, you're thinking about changing it.
14:35Just increase the amounts that you put in, in fact, whenever possible.
14:39OK. Rahul writes in to us, age 20.
14:42Great to have so many people starting out with their SIPs and see so many young
14:48investors starting with their SIPs, that's just fantastic.
14:50Anyway, he has started with a nifty 50 index fund, then shifted to a nifty next 50.
14:56And now I'm thinking about nifty 500 momentum 50 index fund, which is the best for a
15:0140 year investment horizon.
15:04All right. Interesting question, Dayaditya, I'll let you tackle it first.
15:08Wow, 40 years starting at age 20.
15:10That's great. Yeah, I mean, I'd really just a second for three cheers for Rahul.
15:17That's a 40 year outlook at age 20.
15:20That's amazing. I mean, something to be said for foresight.
15:23OK, so if I let me defer back to asset allocation a little bit, if you have a
15:28multi-fund portfolio, Rahul, and you're looking for a large cap allocation, I would
15:32go for a plain vanilla nifty 50.
15:35If, on the other hand, you're looking for, you know, all in one fund, then I'd go to
15:39something that involves the nifty 500.
15:42I'd actually just prefer the nifty 500, you know, plain index fund.
15:46But if you're going for the momentum fund, that's fine.
15:49If it's a one fund portfolio, I'd go for the 500 momentum.
15:52Otherwise, I'd go for the nifty 50.
15:55OK, so nifty 50 is your choice.
15:58Santosh, what would be your advice?
16:00I think I would say that we're actually spoilt for choice in terms of where you want
16:04to do an SIP. You know, for long, we believed that nifty 50 was a great way of, you
16:10know, investing and forgetting about it, especially when you have a 40 year horizon.
16:13Nifty next 50 made it even better by giving you a little bit of the mid-cap
16:18exposure. But the cream right now is the nifty 500.
16:20I agree with Aditya, the classic nifty 500 itself is phenomenal, where about 75
16:26percent is in large cap, the balance 25 percent is mid and small.
16:29Now, when you go to nifty 50 momentum, the data that we have for the last 90 years is
16:33just too staggering.
16:35And if you can continue for 40 years, I am really, you know, overjoyed for what Rahul
16:40may get, because the nifty 50, momentum 50 for, you know, nifty 500 has delivered
16:47almost, you know, one and a half times nifty's performance.
16:50In fact, if I take the nifty 500 momentum 50 for the 19 year period of data that we
16:55have against a 14, 15 percent of nifty's returns, this fund is giving you 24, 25
17:01percent of return by choosing the 50 momentum stocks.
17:03So the answer is very obvious that you would go with the nifty 500 basket of 50
17:07momentum stocks and a 40 year time horizon will iron out any volatility, if ever there
17:13is any, in the 40 year period and will make you make some really handsome gains over
17:18that period. So my verdict is nifty 500, momentum 50.
17:23Nifty 500, momentum 50.
17:25All right. You have both choices and a very long time horizon, Rahul.
17:29So, I mean, no harm in doing both.
17:32Saurabh is writing in age 33, says I am looking to invest 4500 rupees a month.
17:37Can you suggest some funds?
17:39Now, no additional detail there on for how much or what the goal is or what the
17:45expectations are. But OK, let's say that this is someone starting out with an SIP, has
17:50this amount to spare per month at 4500 rupees.
17:54What would you advise, Santosh?
17:57I think considering we have very limited data, this happens, you know, quite often where
18:01people just want you to help them fix an SIP.
18:04I think they should begin with a balanced advantage fund.
18:08Today, traditionally, balanced advantages fund have a good mix of equity and fixed
18:11income. I think at 4500, you shouldn't worry about too many schemes.
18:15You shouldn't worry too much about asset allocation.
18:17You take the 4500, put it into a balanced advantage fund and let it run for as long as
18:22possible. Should you do well financially and you have more lump sum money or SIP money,
18:26then you can spend some time to figure out an asset allocation and then choose between
18:31equity, flexi cap, multi cap, fixed income, whatever.
18:34But for now, keep life simple, get this SIP run as long as you can, choose a balanced
18:39advantage fund. Again, we are spoilt for choice from funds that have just started
18:43recently to funds that have more than 10 year track record of performance history.
18:48Choose something that you're comfortable with and easy to start with and go at it.
18:52OK, Aditya, let me come to you on answering that query.
18:57Yes, I would actually agree, since we don't have much information, but if the investor
19:01does have a five to seven year time horizon, then I would say, you know, going back to
19:06either Nifty 500 or BSE 500 index fund or a multi cap fund, either of two would be great
19:12for me. OK, so keep it broad and keep it simple.
19:15Just even for a longer time horizon, Aditya, and we discussed this actually on yesterday's
19:20episode of the Mutual Fund Show, an NSE 500 index fund, do you think is in that sense
19:26a safe bet if your play is on the Indian equity market?
19:31I think so. Look, if you want a cross section of the Indian market, I don't see how you
19:35can do much better than the BSE or NSE 500.
19:39I'm not one to say you should only go for active or only go for passive.
19:43I use both. I think people should use whatever they are comfortable with after doing their
19:47own research, of course. But if you're looking for an active fund, go for a multi cap.
19:51That would be my go to.
19:52If you're looking for an index or a passive fund, do the do the 500, the BSE or the NSE
19:58500. I'm not a big fan of the Nifty 50 or the Sensex index funds because that's too,
20:04I mean, that's just large cap.
20:05And it's not what I would want as a young investor for, you know, for young investors.
20:11So I would want at least the 500 or let's say the large and mid cap 250, one of these
20:16two indexes, if I was going passive.
20:19OK, Pawan is writing in age 29, says they're concerned about recession.
20:26Should I continue an SIP, which is about 30,000 rupees a month or pause for one to three
20:31months to invest in lump sum?
20:34Now, Pawan, it would have been great to actually talk to you and understand why you're
20:38concerned about a recession.
20:40What exactly is the nature of that concern?
20:42But coming to that, the question he has is, should I pause my SIP and invest in a lump
20:50sum down the road?
20:52What would you say to this, Aditya?
20:54So I would say Pawan, there are lots of things to worry about in life.
20:58I don't think pausing a SIP should be one of them.
21:01Don't think about recession fears.
21:03That's all part of the investment process.
21:06Recessions will come and go.
21:08If you have a long time horizon, you should hope that recessions come and go so that the
21:12market does fall and you can get in and then the markets rise again.
21:16So don't try and predict the recession because nobody can really do it very accurately.
21:22And the stock market movement does not correlate with recession movements.
21:27So stock markets are indicators, which means the stock market will move before a
21:32recession actually hits.
21:33So if you're looking at recession data, you've probably already missed an opportunity
21:37in the stock market.
21:38So for an SIP investor, I would say don't worry about recession data, just keep
21:42plowing more money in.
21:43If the market does fall, as I said earlier, just put more if you can.
21:48So let me tweak that question a little bit with the assumption that our viewer is not
21:53necessarily talking about an economic recession, but a downturn in the markets,
21:58because that is a query that we get very often.
22:01Aditya, I'm sure it's something that you feel very often as well.
22:03People are constantly wondering that markets at record highs, new highs, new highs.
22:08When is the turn going to come?
22:10And at that time, should I pause my SIPs so I'm not buying in at record highs and wait
22:15for markets to cool off?
22:16If that was the query, what would you say?
22:20So if I were a new SIP investor and the market fell, I would be very happy.
22:24And this is something that I try to get new SIP investors to think about, because you
22:28want to purchase your mutual fund units at lower prices rather than at higher prices.
22:33And if you're accumulating money in mutual funds right now, the lower price you get,
22:37the better it is for you.
22:39So, no, please don't stop it, because if the market does fall, because you have an SIP,
22:45you're automatically getting your mutual fund units essentially at a discount.
22:49And that's a good thing.
22:52OK, Santosh, what would you say?
22:54And I'm going to present the modified question to you as well, because that's what most
23:00people are concerned about when it comes to their SIP, right?
23:02The economy is at one end.
23:04But the question is that, are you catching the falling knife of a falling market or are
23:09you potentially in danger of doing so?
23:13I think you're right, Aman, when they mean recession, they mean the market's going down
23:17and the depreciation, the value of the investments that they've made.
23:21Now, it's natural if you're a new investor to think that there are two things that can
23:25happen. Number one, either you pause or stop your SIP.
23:28And number two, you come back at the bottom of the market, hoping that you are actually
23:32beaten or taken the advantage of the market.
23:35Now, I wish this were true.
23:37And, you know, many of us would be living different lives if that was possible to, you
23:41know, predict a recession or predict a correction in the stock market and then come back
23:46again when it is done at a lower level, that is to sell high and then to buy low.
23:50We all know it's difficult. And Pawan, I hope you also get it that it's not possible to
23:54do so. Second, having a correction or a volatility or even a depreciation in the
24:02markets or correction in the market and your SIP continuing is the best thing that can
24:07happen to you, generate long term value and wealth.
24:09Therefore, pause is completely out of the option.
24:12Please don't worry about the market going down or falling.
24:16Pause is not an option.
24:17You will realize that after a few months or maybe one or two years have passed by that
24:22this correction or this volatile patch has been your best investment experience because
24:27you're buying lower value, higher units and making more sense of your systematic
24:35monthly investments over a period of time.
24:37So I think it is maybe in your best interest not to pause or stop.
24:43Yes, if you have a lump sum and the markets have corrected, make the most of it by adding
24:47on to your SIP.
24:48I mean, if that is what you're asking, let the SIP continue.
24:51If the markets have fallen three months, six months down the line, add some extra money
24:55if you have, but not to pause, but to continue as long as you can.
24:59OK. Mahima is writing in age 30, says she's invested in Quant, ELSS, TaxSaver, ICSA,
25:06Prutech and Bandhan ELSS, TaxSaver fund for three years.
25:10Should I continue investing in the same funds or switch?
25:13Aditya, you want to take this very quickly?
25:16So, OK, for the ELSS funds, well, there's no need to switch an ELSS fund.
25:20In any case, you have a three year lock in, so you may not be able to get out based on
25:23when you put it in. But just because, you know, time has moved on doesn't mean you need
25:28to pick another fund. As long as your fund is highly rated and you can check this on
25:32various websites for the star rating of the fund, as long as you've got, let's say, a
25:37four or five star rated fund, you know, you're usually good.
25:40So I wouldn't recommend changing that.
25:42OK. All right.
25:44We have run out of time on the show, but thank you so much, Santosh and Aditya, for
25:48joining in, taking our queries.
25:50Thank you, viewers, for tuning in and writing to us.
25:53Numbers on your screen in case you want to reach out to us.
25:56That's all the time we have on The Mutual Fund Show, but stay tuned.
25:58A lot more coming up on the other side on NDTV Profit.