Ajay Tyagi, who has nearly two decades of experience in the capital market, says that many retail investors start to invest on their own as they feel they can make money faster than professional fund managers.
Tyagi, an Executive Vice President & Fund Manager – Equity at UTI AMC Ltd, manages about Rs 17000 crore worth of AUM, says that one has to realise that investing is a full-time job that requires deep insights into businesses, their valuations and finally having a huge amount of patience, in an interview with Moneycontrol’s Kshitij Anand.
Q) The market is going through some consolidation, but do you think the bigger story is still intact and it is still a good buy on dips market?
The big picture for India is its young demographics, growth in the working population, and increasing middle class, all of which put together are going to lead to continuing growth in consumption over many decades.
India is not only a growing economy but also one of the fastest-growing among large-size economies. This growth shall continue to create opportunities for businesses and therefore well-managed businesses will continue to create wealth for their shareholders.
In a nutshell, the story is absolutely intact and investors should continue to invest with long-term opportunities in mind.
Q) It is a well-known fact that the market discounts everything in advance and this it might have discounted a lot. Do you think with growth catching up – the market could take a breather and let numbers do the talking before resuming its uptrend journey?
While it is right to say that markets discount the future, but no one can say with certainty about how much of the future is already discounted or whether the immediate future will positively or negatively surprise in terms of growth.
It is precisely because of this that it is difficult to gauge the direction of the market in the near term as there are so many transient factors that are pulling markets in opposite directions.
At every stage, markets do want evidence of growth in underlying profits and cash flows of various businesses and only after gaining conviction about that they march ahead. To that extent, it would be no different this time as well.
Q) There is a lot of buzz in the financial services space on account of privatisation or merger of NBFCs. How should one play the financial space post Budget 2021?
As far as we are concerned, we remain focused on investing in Banks and NBFCs that have a track record of industry-leading NIMs, low credit costs, and transparency around NPAs, all of which ultimately results in strong RoAs.
On top of this, we look for institutions that are growing faster than system-level credit growth. Consistency and predictability is one of the key tenets of our philosophy and therefore we will remain focused on financial institutions that are best in class rather than be opportunistic about investing in privatisation candidates.
Q) 7 consecutive months of outflows from the equity MF schemes tell a story that investors would like to take things in their own hands, especially the ones who can take risks while the risk-averse ones continue to follow the SIP route. What are your views?
This is a common behaviour exhibited by retail investors whenever markets continue to have a spectacular run. Many retail investors start to invest on their own as they feel that they can make money faster than professional fund managers.
However, one has to realise that investing is a full-time job that requires deep insights into businesses, their valuations, and finally having a huge amount of patience.
Our experience has been that only a minority of retail investors possess these insights and as markets mature and evolve further, most investors will prefer to grow their wealth in a more predictable and systematic manner by investing their hard-earned with those Mutual Funds which follow rigorous investment processes.
Q) We have seen a lot of digitization taking place in every sector amid the outbreak of COVID last year. Can Internet-based companies, insurers turn out to be the next wealth creators of this decade? What are your views – if not, which sectors are you eyeing?
Digital adoption by businesses across various industries has been gaining steam over the last five years. However, COVID just accelerated and brought forward this digitisation process and made it an imperative rather than a discretionary spend.
Online business models across industries are solving customer needs and therefore would continue to gain scale going forward.
Some of these businesses will also be able to monetise their customers and build an economically viable as well as scalable business model. But, do expect a lot of mortality in this space with the survivors ultimately creating huge wealth.
Q) How did UTI Equity Fund perform in 2020 and what are your plans for this year? Are you planning to launch any new products?
UTI Flexicap Fund (earlier known as UTI Equity Fund) witnessed a strong performance in 2020. Our core philosophy of buying high-quality businesses with attributes like high ROCEs and high cash flows along with a strong growth outlook served us very well.
It is our belief that such businesses create economic value and it is this economic value that becomes the source of long-term wealth creation. We will continue with this philosophy regardless of the market mood or temperament and will keep identifying businesses that possess the above attributes and get them into our portfolio.
As far as launching new products are concerned, we are constantly evaluating our product suite to see whether there are any gaps and whether there is investor interest towards something that we don’t have yet.
However, only when we are convinced that the product will offer a favourable risk-adjusted return for our investors do we launch it.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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