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00:00Hello and welcome, you are watching the Mutual Fund Show and working with your portfolio
00:10or of course, managing a portfolio during these turbulent times can be quite a task.
00:16To help us understand what one should do with the way the NAVs are falling, Sintosh Joseph
00:22is the Founder of Jomint Investor Services and Anant Ladha, Founder of Invest Aaj For
00:28Kal.
00:29Join us.
00:30Thank you gentlemen for taking the time out to talk to us and let's start with you Sintosh
00:34first.
00:35These are very tough times, you know we have all been talking about a correction that's
00:40been coming but for whatever it's worth the last 5 to 7 days have been tough.
00:45Markets have declined substantially, portfolios have declined even more.
00:50Most portfolios are trading lower and that could be a little bit of a concern for investors.
00:55Sintosh, start by telling our viewers and investors what should they do in a situation
01:01such as this.
01:02Should they just hold on, not look at their portfolio or would it be wise to start nibbling
01:07in and adding for allocations further in an incremental manner?
01:13Good afternoon, great to be on the show and it's nice we are talking about tough times
01:18when in the last 7 days we have seen this kind of activity.
01:21You know it's interesting that by and large for the last few months most of us were waiting
01:26for a correction and when the correction has finally come in this form and fashion we are
01:31all now beginning to get spooked wondering how deep this correction is going to be or
01:36how tough the times have been.
01:38Now for most of us this bit of correction is, we are not used to it by and large month
01:44on month, week on week and especially for the last 4 years we have been in extremely
01:48positive and buoyant markets.
01:51This experience that we are seeing for the last week or 7 days is classical of the markets
01:58that when it starts turning around it gives you those tough scenarios where you really
02:05wonder am I in the right place, did I do the right thing by investing or should I pack
02:09up right now or should I sell everything and buy when the markets have settled out.
02:14The simple answer to all this is, this is exactly what markets do, they tend to actually
02:22give you that surprise twist or turn.
02:25Now mind you the surprise twist or turn is what we have been enjoying for the last few
02:28months where markets have been inching higher and higher and higher.
02:31The last one week yes markets have reacted to a lot of global news from China getting
02:37a lot of flows to the war in West Asia.
02:40So this is the challenge that markets will test you with regularly, time in and time
02:45out.
02:46For all of the investors watching this, please remember this is classic markets, stay put,
02:51stay invested.
02:52There may be challenging times but markets will get better of it.
02:56Anant, what do you recommend?
02:59Would you recommend investors to take some profits off the table or do you recommend
03:04they should do nothing and just sit tight?
03:08Hi, firstly, thank you so much for having me on the show.
03:11Always fun interacting for long term investors, specifically mutual fund investors.
03:16I remember that last month also we did a similar show with you guys and there I strongly discussed
03:23that if you have overexposure in small caps and mid caps, you should probably book that
03:27amount.
03:28If you are an aggressive investor, you can do 18 months STP back into the same fund.
03:33And if you're a defensive investor and you feel that your risk profile is mismanaged
03:37and you are aggressively invested in small caps, you should probably shift some amount
03:41in your large cap allocation.
03:44So right now also I have just three simple points to discuss.
03:47Firstly, look at your risk profile.
03:49If you just because market was trading higher and they were giving positive returns, you
03:55have been seeing 30% plus CAGR in last few years in small caps and you feel that if you
03:59are over allocated in small cap, follow your risk profile and stick to your basics.
04:04Secondly, right now we are not even 10% down from the top.
04:10So obviously there is nothing to worry about.
04:12You should stay focused on your long term goals.
04:14Just maintain your SIPs.
04:16Just in case if you see further volatility on the downside, for example, if you say 4
04:20to 5% more volatility on the downside, probably that might be an opportunity for you to double
04:26down on your SIPs and use this dip as an opportunity.
04:31And finally, make sure that you have proper asset allocation in place.
04:35Gold, debt, these are equivalently important funds, specifically in the bad days.
04:40They'll help you stay invested for long term.
04:44So just be focused on your long term risk profile.
04:48Santosh, so if investors have money sitting on the sidelines, because I know they were
04:56a bunch of investors, bunch of fund managers from mid to late last year where we were talking
05:02about how expensive the valuations were and had taken cash calls.
05:06And now if you have that dry powder available on the side, do you think it may not be such
05:12a bad idea to upfront some of those allocations or now may not be the time just yet?
05:19So the guys who have maintained a cash call seem to be very happy right now because they
05:23took the cash call and the market is kind of responding to the cash calls that are taken,
05:28at least that they have got it right.
05:30Now, usually when these kind of corrections happen, what all of us are looking for is
05:35when will it settle down?
05:37Therefore, it won't make sense to buy everything upfront, whether you're investing new or you
05:44got dry powder and you want to invest.
05:47I think it just makes prudent sense to start staggering or nibbling into, you know, stocks
05:53and investments which you felt were good but were expensive.
05:56But now the market has given you maybe a 5-7% dip already.
06:00As it keeps dipping more, you can start buying in more.
06:03So the answer is not to jump in at the sign of first correction, but if you wait, you
06:08may still get a better averaging out or maybe better price to enter in.
06:12But clearly, you should be watching out for opportunities.
06:16Keep an eye on opportunity.
06:17Now may not be the time to double down, but there should be better times around when you
06:21may get a better entry point.
06:23Anant, you know, you talked about diversification and I think diversification should be undertaken
06:30at an asset level as opposed to a product level.
06:33So let's talk about the asset level because there is an impending rate cut.
06:37There's definitely an MPC meeting this week.
06:40Whether or not we get a rate cut is anybody's guess.
06:43Do you feel like now could be the time given the sort of run-up that equity markets had
06:48seen before this 5% correction, rebalancing your portfolio and increasing allocation of
06:54debt may be a good idea?
06:56See, I feel that you should follow your asset allocation on a yearly basis.
07:01You should have a set timeline where you will be reviewing your portfolio and deciding on
07:06your initial asset allocation.
07:09There's a very interesting data, which I was just reading just before our show.
07:12If we check out the returns of all the emerging markets in 21st century and compare the equities
07:18returns with gold returns, probably India is the only market where gold has underperformed
07:24the equity market.
07:25Other than this, all the emerging in all the emerging market, if we check out the returns
07:30in local currency percentage wise, then gold is giving better returns than equity.
07:36What my conclusion is always have gold debt equity in a proper combination.
07:41According to your risk profile, this will help you sail through difficult times.
07:45If you feel that today you are over allocated to equity because markets have rallied in
07:49last one year, then yes, probably you should take out some money from equity and follow
07:54your asset allocation.
07:57If you look in short term, probably asset allocation might not be that fruitful for
08:02you because in short term, you might see some positive jokes on the equity market and you
08:07will feel that you missed out on the rally.
08:09But when you will look from a long-term perspective, probably three to five year perspective, you
08:13will always feel and come to a conclusion that having a proper asset allocation is a
08:18blessing in disguise.
08:19Santhosh, what are your thoughts on this?
08:21Do you feel like the current market mood warrants investors to rebalance their portfolio and
08:27potentially increase allocations to debt in anticipation of a rate cut from the RBI, not
08:34today but over the course of the next couple of months?
08:37Well I think there are two ways to look at this.
08:39Number one, asset allocation should be the starting off point of your portfolio construction.
08:45You do not build or change asset allocation because the markets have reacted differently.
08:50You start off your portfolio by understanding what is the asset allocation we need, choose
08:54assets that are complementary to each other, that will act differently when the markets
08:58perform differently.
08:59Now we are at a particular juncture where markets in equity are taking a bit of a breather
09:05and a fixed income is looking attractive.
09:08This is the point where you will re-look at your portfolio of what you have already
09:12started to figure out, do I want to do something tactically to the strategic portfolio that
09:17I already have.
09:18So you should already have fixed income allocation to your portfolio depending on your profile.
09:23If you feel that yes, rate cut is going to happen and I want to benefit from it, then
09:26you actually increase or decrease based on the medium to long term view that you have.
09:31Do not react to the markets to changing asset allocation.
09:36You begin by building a robust allocation to help you navigate this market volatility,
09:41the changes that could come by periodically, therefore helping you navigate markets better
09:48and also give you opportunity time and again that if there is an opportunity of small tweaks
09:54that can help you be sharper tuned to the market and get benefit of it, that's when
09:58you actually change your asset allocation.
09:59Otherwise, it's a little bit of a boring exercise where you maintain a larger theme going for
10:04you for a long period of time.
10:06Santhosh, I want to talk about another sort of idea that's doing the rounds in the last
10:12couple of days with the way China has been performing or Hong Kong for that matter.
10:17Do you feel like geographical diversification is important?
10:22The reason I ask this is because while we have seen a secular bull run on the nifty,
10:29this is surely not reality, right?
10:31At any given time, if we do go into a correction mode, there is a good chance that there could
10:36be some of the market case in point Hong Kong and China that could do well.
10:40Do you recommend retail investors to consider adding maybe the Hong Kong ETF, maybe some
10:46of the global funds such as the Edelweiss Hong Kong fund, China fund?
10:52So the interesting part of this question is that returns of the asset or the market always
10:59drives attention.
11:01The fact that for the last two weeks, three weeks, we're all talking about Hong Kong and
11:04Chinese market is very evident from the fact that they have just run up so much in the
11:09just last few weeks.
11:11Now, very simply put, historically, I have been a firm believer that we have to invest
11:17in international assets, at least to a small percentage of our overall portfolio.
11:21Because let's put it this way.
11:24Even at a very aggressive level, we are about three to 4% of the global equities market.
11:29Therefore, the Europe, American and the Chinese market all put together form a far larger
11:37subset of the global equities market.
11:39Now, whether it's China today or at some time US and at some point UK and even the South
11:44Americas, we have a bigger market that we can tap into, which give us the diversification,
11:50which give us a plane to global markets rather than now saying, should we look at China?
11:56It was always better to have some exposure to global markets, developed markets, emerging
12:01markets, some part of the portfolio.
12:03Now, it's nice that people today suddenly realize, hey, even the Chinese market can
12:07do well.
12:08You know, we had a two year slow or no activity from them.
12:12And today we are looking at it.
12:13So therefore, having international allocation from an investor whose portfolio profile matches
12:19so is good rather than chase return.
12:22It's better to be invested before so that when the returns happen, you benefit from
12:25it.
12:26Anant, you talked about diversifying into gold.
12:30Would you diversify or recommend your clients to go out and have some allocations made to
12:37markets such as China and Hong Kong?
12:41Interesting question.
12:42But I usually feel that investing in a Chinese market or maybe Hong Kong market or for that
12:47matter in Japanese market are probably for super aggressive investors.
12:53If you are a normal investor with a normal, decent, moderate to aggressive profile, probably
13:00you can invest in S&P or Nasdaq index that will give you exposure of a better index,
13:06which is more stable and which consists of a better set of economies and companies.
13:13So I would personally recommend investing in S&P as compared to Chinese market as on
13:18date.
13:19I feel that Chinese market have performed really well, but looking at the past history
13:23of China, they are quite unpredictable.
13:26So looking at the aggressiveness of their decision making, I feel investing in Chinese
13:30market is probably only for super aggressive investors who even understand the risk associated
13:35with it.
13:36Right.
13:37So that's one coming in with the recommendation that it might be a good idea to have a geographical
13:41diversification.
13:42Remember, of the 100 percent, 98, 99 percent of our portfolio does have a home buyers.
13:49So a little bit of an allocation may not be such a bad idea at this stage and it doesn't
13:53necessarily have to be China or Hong Kong, but of course, funds that cater to the global
13:58marketplace.
13:59Santhosh, the other one that stands out for me right now, and I'm assuming that there
14:04has been a little bit of rush towards these balanced funds.
14:07These generally by the nature of the product are an expensive investment.
14:13But the fact is they provide you the asset allocation, which may or may not be suitable
14:17for a particular investor, because a lot of this is a cookie cutter approach.
14:21Do you feel like now may be not such a bad idea to add a little bit of balanced funds
14:26to one's portfolio if you don't already have any exposure to debt in that sense?
14:31Yes, I think you said the term right.
14:34It's a cookie cutter approach and most people are actually fitting into a product and the
14:39product fitting into what they need.
14:41Now, also thanks to the way the products have done in the past, most people think that with
14:47having fixed income and equity allocation, if my returns are going to be closer to equity,
14:52I'm happy with that.
14:53And that's why people have been so warmly embracing the whole hybrid funds and balanced
14:57advantage funds.
14:58I think the biggest reason why someone should look into balanced advantage fund is if they
15:03are not able to, one, make a decision about what segment of fixed income to be in, two,
15:09they do not know how to navigate between when to enter and exit into fixed income.
15:13Now, for those investors, balanced advantage was a great advantage.
15:17Now, coming into the situation right now we are in, if you want to make most of the markets
15:22right now and you want an equity exposure, then you have a different set of funds.
15:28But getting into balanced advantage funds today because you want to benefit from fixed
15:32income, I don't think balanced advantage will give you that advantage because the fixed
15:35income portion in balanced advantage is to give you a hedge for equity performance or
15:41underperformance thereof.
15:43I think if clients are looking for an upside in fixed income, I think you're better off
15:47choosing those dedicated fixed income duration or corporate bond funds.
15:52But balanced advantage is for those equity investors who want a little bit of fixed income
15:57included into the portfolio, not so much just to make that extra return on fixed income,
16:01but to give you a protection for equity through fixed income.
16:06Ananth, are there any specific opportunities or undervalued stocks or sectors that one
16:14could consider investing in, even though I do agree that thematic funds may not be ideal
16:18because in that case you need to take two sort of calls, right?
16:22One is the entry call and the exit call, always a tough one.
16:25But nevertheless, anything or anywhere that you see opportunity?
16:30So presently, if you look at the market capitalization of top 10 stocks, you can even consider top
16:3615, top 20 stocks.
16:37They are at the lowest level as compared to overall market.
16:40So investing in large cap can be a systematic way to check out some of the stocks which
16:46are comparatively better placed as compared to small caps.
16:50Secondly, IT and banking for that matter has been underperforming in the recent past.
16:57Whenever you are taking a sector call, I always believe we should look out for sectors which
17:00have been systematically underperforming and you have chance of getting some alpha.
17:05For example, if we look at defense or PSUs, they have performed really well, although
17:08they have corrected a bit in last three, four weeks, but overall they have performed or
17:14rather outperformed the market.
17:16So you don't take a technical call or a sector call in a fund which is already outperforming.
17:22This is what usually happens because recently also as per the data, majority investment
17:27is going in sector funds, that too in the funds which have outperformed.
17:30I feel you should take a contract call whenever you are looking out to take a sector call.
17:34Similarly, IT and banking might be the bunches where you might get some opportunities and
17:40large caps obviously are better placed as compared to small caps and mid caps.
17:44Right.
17:45Let's talk about market, you know, the style of investing and type of funds.
17:49Santosh, up until maybe a few months ago, passive investing was turning out to be quite
17:56the chosen route, at least for large cap stocks, where generating alpha by active fund managers
18:02was a little bit of a challenge because there is very little information arbitrage.
18:06What I have seen is some of these passive mutual funds have lost significantly in the
18:10recent past.
18:11Do you feel like this is a short term blip and, you know, passive investing could still
18:17be a good low cost mechanism for investors to build the large cap side of the portfolio
18:23or do you prefer active fund managers in that space?
18:26And all of this in context of how volatile the markets are and the fact that I do believe
18:31that we've borrowed returns from the future with the recent rally that the markets have
18:34seen in 2024.
18:35So, yeah, there's no taking away from the fact that we've seen so much of returns front
18:41ended over the next year or so and therefore any return expectation should be in moderate
18:47even though there's a correction that we are witnessing right now.
18:51Now, the first thing about passive investments is that, number one, it's easy, it is DIY
18:56and also low cost.
18:58Now, stretching it to passive investments and active investments, thinking that we can
19:02perform or underperform, I think it's not the right comparison because actives have
19:06a role to play in terms of generating an alpha.
19:10There was a period of time where actives were not able to generate an alpha and particularly
19:14in the large cap space and passives were catching up there and they were growing and ballooning.
19:18Over the last two to three years, we have enough data, almost 80-90% of the large cap
19:23funds have comfortably beaten the index funds with outperformance and that simply came because
19:30of the skew that the market had and as the skew started reducing, the active funds in
19:35the large cap space started performing.
19:38So, I think the debate between active and passive is not so much so to do with whether
19:43we're going to outperform or we're going to beat the index.
19:45I think it's about what the investor wants.
19:48If someone wants to not worry about which call to take, which call not to take, whether
19:53you want to benefit from the upside that an active fund manager can give, low cost, do-it-yourself,
20:00long term investor who doesn't want to look at his portfolio, then passives still have
20:04a place for you.
20:05But if someone wants their portfolio to be very actively managed, very nimble and in
20:12participation with how the market dynamics are, there's enough room for actively managed
20:16funds across category, large, mid and small, to generate an alpha and to generate excess
20:20returns for you.
20:22Right.
20:23We shall start wrapping up this conversation.
20:26Anand, before I do that, and I guess this is an important question because, you know,
20:32investing has got so much to do with emotion and discipline as opposed to strategy for
20:36most investors, right?
20:38And at a time like this, when every headline, every news channel is talking about how the
20:44markets are declining, valuations are concerned, China is the big problem and of course, the
20:50geopolitical stress.
20:52What and how do you think investors should deal with emotions?
20:56And of course, ensure that they are working with a strategy as opposed to getting emotional
21:01and sensitive and about their investments?
21:04I feel whenever you're emotional, data will help you out.
21:07There are two interesting data which I can share here.
21:10Firstly, if you check out data of last 25 years, there were only three years where you
21:16had a correction of less than 10% in a particular year.
21:19So what I mean to say is every year you will see one, minimum one correction of 10% plus.
21:24So you have to be mentally ready for it.
21:27Secondly, if you talk about the Iran-Israel thing, which is going on, the global confusion
21:32or the global war situation, which is right in front of us.
21:35Firstly, I don't feel that other countries, specifically USA, will play an important role
21:42and further deteriorate the situation.
21:44But even if it happens, I will love to share the example of Kargil war.
21:50Just before the war, market fell by 13%.
21:53But eventually market rallied in the next four months by 41%.
21:57So yes, war-like situations, extreme situations will create market volatility and you have
22:02to be ready for it.
22:03But corrections are temporary, growth is permanent, you have to keep this in mind.
22:07But at the same time, you have to be rational towards your asset allocation and you will
22:11be good to go.
22:12Santosh, how can one ensure that their investment decisions in these volatile markets are driven
22:17by strategy and not by emotion like fear or greed?
22:22I think we have to be honest with ourselves, all of us being humans, we are prone to emotions.
22:26And I think that's why sometimes we are so happy when the markets are doing well and
22:29we are sad and gloomy.
22:31In fact, most of us who are on WhatsApp groups realize that suddenly when the markets are
22:35not doing well, the WhatsApp groups go eerily silent.
22:38And when the markets are doing well, there is messages and there is outbursts of joy.
22:43It is first of all essential to understand we are emotional beings and we make decisions
22:47or we are prone to emotional decisions.
22:50So there are two points to this.
22:51I think I agree with what Anand said that data helps us be grounded, that even an excessive
22:57return is not sustainable and even an excessive correction is not going to be sustainable.
23:04He rightly put it saying that the correction is temporary, but the growth is permanent.
23:08That's exactly the nature of the market.
23:10The second part, and this is a critical part where more often times we ignore this, is
23:15we need to seek or get professional help or an outsider to help us.
23:20Now, that's where advisors and mutual fund distributors or even people who can help you
23:26manage your wealth become critical because they are now using all data and information
23:31available to help you stick to your ground or stick to your investment mandate.
23:36The winner in such a decision is going to be the guy who's standing longer or standing
23:42last.
23:43Essentially, all that we spoke about is that, you know, volatilities will come, wars will
23:47come, the China story will come or emerging market story will go.
23:51These things are normal occurrences in the market.
23:53If you can stay stuck to the investment that you've made, stay invested for long, you're
23:58eventually going to be rewarded and you'll be a winner.
24:00So therefore, avoiding emotions is directly proportional to the returns outcome.
24:05Right.
24:06One last question, Anant.
24:07I'm going to simplify this for the sake of our viewers.
24:10If you do have a hundred rupees sitting in liquid, how much of that will you use to top
24:14up your existing investments?
24:16Very interesting question and completely depends from investor to investor, but yes.
24:21Somebody with an average risk profile, 60%, maybe a 50-50, but 60 or 60-40 equity debt.
24:29So I would personally do a five rupees STP per week.
24:35This is in this market condition or this is?
24:37Absolutely.
24:38In this market condition, five rupees STP per week and anytime market goes 10% down
24:46from the top, I'll double down the STP amount.
24:48So we're down about 5% to be specific, 5.5% right now.
24:53So if we get another 4%, you will put your full hundred rupees out is what you're saying?
24:57Double down the STP amount.
24:58So you're saying you'll pre-pone the following week's STP into the current week?
25:03Hundred percent.
25:04Okay.
25:05Santosh, that question is for you as well.
25:06If you have a hundred rupees sitting in liquid, how much of that will you upfront this week
25:12or currently?
25:14And when could you consider making a lump sum investment as well in that sense?
25:20In the given scenario, I'd straight away double down with a 10% investment.
25:24That is the 10 rupees of the hundred will go right away in.
25:26I don't want to miss out this correction, how big or small it is, but the most critical
25:31aspect is I would ensure that the balance 90 is staggered well enough.
25:36And normally I follow a hundred day approach, but I at least do 1% every day or maybe five
25:40to 10% a week and stagger it between 90 to a hundred days, which usually in market terminology
25:46is about four to five months because we got about 22 days in a month and a hundred days
25:50will take you to close to five months.
25:53Now that will continue for the larger part of the hundred.
25:56But since I've seen what I've seen in the short time of seven days, I'd go with a 10%
26:01straight away.
26:02Completely out of time, but one last one, Ananth, because you talked about gold and
26:07I want to ask you this, gold stocks, even though they have very little to do with actually
26:11gold prices or gold ETF, because SGBs aren't coming anytime soon.
26:16Gold ETF or mutual funds are better.
26:19What about you, Santosh?
26:20How much of your portfolio should be in gold?
26:22And if you've got no gold allocations, how much should you start with for an average
26:26risk profile?
26:27Fortunately for me and for all my investors, I've been allocating gold for the last four
26:32years in a row and we're sitting quite handsomely on gold.
26:35I'm any day a gold ETF fund or fund.
26:38It's the most convenient and ease for investors to access gold, whether in SIP or lump sum,
26:44in any format of lump sum or SIP or STP, accessing gold ETF fund or fund is the best route.
26:52Yeah, this is interesting.
26:53As Indians, we're all fortunate enough because all of us out of choice or no choice have
26:58had allocations made to gold.
26:59So we're all richer today than we were maybe a few years ago.
27:02But thank you, gentlemen.
27:03Great talking to both of you, always good to get an understanding.
27:06And thank you for coming.
27:07Nerves of investors are probably very concerned, given the big fall that the markets have been
27:12seeing.
27:13Have a good day and we'll see you soon.
27:14You too.
27:15Thank you so much.
27:16Well, with that, we're completely out of time on this show.
27:20But like our advisors said, you want to start nibbling into the markets if you get a correction
27:25of 10 percent or more, you should upfront and double down your SIP.
27:30Of course, what you also can do is allocate about 10 percent of the cash sitting on the
27:35sidelines at every dip.
27:37With that out of time.
27:38Thanks for watching.