Bullish on capital markets theme despite STT hike, says Groww's Varun Gupta

Groww

• Varun Gupta finds opportunities in hospitals, railways, defense, capital markets.
• Groww Mutual Fund launches industry-first hospitals ETF NFO
• Mutual fund penetration in India rising but still below developed markets

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Varun Gupta, CEO of Groww AMC, believes that the Indian markets are in a U-shaped recovery with selective opportunities emerging, particularly in hospitals, railways, defense, and capital markets despite recent STT increases. He was speaking at the sidelines of Groww Mutual Fund's Hospitals-focused ETF NFO launch.

Despite the recent increase in Securities Transaction Tax (STT), Varun Gupta remains bullish on capital market stocks, viewing them as companies with durable competitive advantages. "Once you have created an infrastructure like exchanges, depositories, brokers, they will continue to do well over a period of time," he explained. His thesis is that capital market infrastructure, once established, benefits from network effects and increasing participation regardless of tax tweaks.

In January, inflows into gold ETFs soared to Rs 24,000 crore, edging out equity fund inflows for the first time ever. Gupta addressed the recent surge in precious metal ETFs, and noted that Groww's silver ETF ballooned from Rs 30 crore at launch to around Rs 600 crore at peak, exceeding even their gold ETF.

"That is unfortunately the truth always," he said about investors chasing returns. While he cautioned against this behavior, Gupta also sees the "financialization" of physical assets like gold as a key positive for India's long-term investment ecosystem. "It's the best way to invest in gold," he said on ETFs.

Despite Groww's strong digital brand, Gupta remains committed to the distributor model. His rationale is that in the US, 76% of $38 trillion in mutual fund AUM is still under advisory, despite decades of financial literacy. "Wealth creation happens with knowledge and understanding of markets, which distributors can provide better," he explained.

He emphasizes India is just seeing "the tip of the iceberg" in mutual fund penetration, with household savings in MFs rising from 3% in 2018 to around 11-15% today, which still far below developed markets.

On market outlook, Gupta expects continued sideways movement but sees "very good opportunities for fund managers to select the right stocks. According to him, earnings recovery has already begun, looking at positive Q3 results from companies.

Groww Mutual Fund launched industry-first hospitals ETF NFO - the Groww BSE Hospitals ETF and the Groww BSE Hospitals ETF FOF — which offers investors exposure to India’s hospital sector through the BSE Hospitals Index. Hospitals form the largest segment of India’s healthcare ecosystem, accounting for nearly 74% of the market, and are expected to continue expanding, noted the fund house.

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