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Daily Voice | Top 5 themes for multi-SIP approach by A Balasubramanian of Aditya Birla Sun Life AMC

The basic principles of investment remain the same, irrespective of what the occasion is. Building your portfolio focussed on your purpose, needs and a long-term perspective will help to achieve your goals and generate wealth in the future.

November 03, 2021 / 04:29 PM IST

While explaining investment mantra, A Balasubramanian, Managing Director & CEO at Aditya Birla Sun Life AMC said building a portfolio focussed on purpose, needs and a long-term perspective would help to achieve goals and generate wealth in the future.

"Time in the market is more important than timing the market. And if you are yet to make a start, then don't wait any longer to start your investment journey."

From a portfolio allocation point, he believes it is worthwhile building exposure to these themes including digital and real estate in the form of a multi-SIP approach.

"While doing so, one should also be prepared for volatility in the market and hence Balanced Advantage Fund schemes should be considered part of the portfolio," said Balasubramanian, AMFI chairman, has over 26 years of experience in the Mutual Fund industry as Portfolio Manager both in Fixed Income and Equity.

Q: The market has been seeing small correction and consolidation, followed by one-way rallies. Why is the market not seeing major corrections like 10-20 percent and do you expect the similar kind of trend to continue in coming years? And will the Indian markets beat global peers going ahead?

Close

The broad market has been driven largely by three factors - liquidity, earnings uptick as seen in recent quarterly performance of most of the companies, and in the global space, India being favoured as one of the fastest growing countries among emerging markets. These three factors so far have still been driving the market sentiment. Last but not the least, the under ownership in equity in general that one has seen in the last so many years in India, with prevalent low interest rates in the entire financial market, there is an allocation towards equity that is also happening from the retail segment of investors.

So while one can say the market is holding on to higher level and valuations are steep, and the recent volatility would have set some sort of a question mark in terms of sustainability of the market momentum, it appears that the volatility will not be significant enough to create damage for the market given the factors mentioned. These factors would continue to be drivers for market stability.

Therefore, I would assume the market momentum would remain. Also, the China factor has now created a debate among global investors that the emerging market has to be looked at as ex-Japan and ex-China. If that happens then India would probably be one of the most recognized and respected markets within emerging markets. Therefore, that will keep the overall positive outlook on India even from a global investors point of view.

Q: What is your investment mantra that you like to share with investors on this Diwali?

The basic principles of investment remain the same, irrespective of what the occasion is. Building your portfolio focussed on your purpose, needs and a long-term perspective will help to achieve your goals and generate wealth in the future. Take a goal-based approach to your portfolio and nurture it with patience and commitment.

As I have always believed in myself as an investor, time in the market is more important than timing the market. And if you are yet to make a start, then don't wait any longer to start your investment journey.

Q: What are the themes that have to be part of portfolio in coming years and why?

We feel the appeal of Digital & Information Technology and Pharma as just a seasonal defensive play has changed significantly post pandemic. So they will continue to be relevant themes in the years to come. We are seeing a cyclical revival in the Real Estate sector so that is a theme to watch out for both in terms of core real estate as well as ancillary businesses such as building materials, home improvement, etc.

Sustainability is also going to be an important theme that will gain prominence with greater awareness on ESG (environmental, social, governance) parameters. Banking & Financials of course form the life blood of any economy, so even though the sector has taken some beating in recent times, the long term outlook for the sector in a developing market like India is a theme that one cannot ignore.

A lot of the recovery plays which we are looking at, be it in the retail sector or the entertainment sector or auto sector, should see a revival. But one has to wait and see how strong the recovery is because there has been some Covid impact.

From a portfolio allocation point, it is worthwhile building exposure to these themes in the form of a multi-SIP approach. While doing so, one should also be prepared for volatility in the market and hence Balanced Advantage Fund schemes should be considered part of the portfolio.

Q: Do you think the SIP flow on monthly basis to increase significantly in coming years, and why?

To answer this question, I will take reference from a recent SIP survey done by us. 83 percent of respondents who have invested in SIPs (systematic investment plan) themselves said they will recommend it to others as well. Almost 50 percent of people think SIPs help in building Long Term Corpus with the benefit of Compounding Interest and that would be the primary reason for them to recommend the SIP way of investing. The survey also revealed that SIPs helping maintain investment discipline was the single-most important reason for 35 percent of the respondents to choose the systematic way of investing.

The reason why I allude to these findings is the very fact that SIP, as an investment tool, has found enduring acceptance from investors and will continue to be the single most useful mechanism for retail investors to participate in capital markets. So yes, it appears that monthly SIP flows will increase significantly in the years to come, driven by accessibility with technology, mutual fund houses expanding their reach to underpenetrated markets and growing number of young professionals adopting the same.

As a fund house we have made this a focus to promote Har Ghar SIP to drive home the message that one can Win With SIP. In fact we have been advocating investing in different themes by choosing the multi-SIP method that can help in building a long term portfolio and provide differentiated experience with a planned monthly outgo as per one's goals and risk appetite.

Q: What are the risk factors that can spoil the current market trend?

The inflation print is something that one will have to watch out for, with economic activity coming back and the demand for goods increasing with gradual normalization of activities. There are still supply side constraints with Covid protocols applicable in many parts of the country. Another risk is of increasing oil and commodity prices and the power supply scenario in India. This could add further supply side pressures.

As we enter 2022, there are some upcoming State Elections that could potentially create volatility in the market. Also, central bankers reversing their policy and then the outlook that is being expressed by them is something the markets will be looking at. RBI will not just look at inflation pressure but will also look at the global trend, therefore any change or policy reversal could generally be seen as a negative by the bond market, which in turn could somewhat impact equity market sentiment.

Q: The primary market is again flooded with IPOs Nykaa, Policybazaar, Fino Payments Bank, Sigachi Industries and SJS Enterprises. Do you think flood of IPOs to continue in coming quarters or will the primary market activity slow down after LIC IPO?

The new age businesses or tech enabled platform models, whether it is for providing a product or a service, are now beginning to get traction in India, on the lines of similar companies having caught investor interest in the US. The recent IPOs in India are actually a true indication of how the risk appetite of investing in such companies have gone up, purely on the basis of huge participation coming from FIIs who have seen these kinds of companies globally flourish and generate returns for the investor.

While in some cases the valuations may not be justified purely based on numbers, but I think given a long rope in terms of time some of these platforms have the potential to become really powerful. In the future as well they will see traction, but as the supply of these things keep rising, investors will be a lot more discerning. We may see some moderation in the IPO segment with moderation in risk appetite as markets keep rising. Also one has to see the valuation methodology of these companies compared to traditional valuation on the basis of profit and see how it is going to play out going forward.

Q: Do you think the measures announced by the government and RBI, so far, are enough to take India near the $5 trillion target by 2024? Do you think oil or any other factor can delay economic growth in coming years?

There is absolutely no doubt that the Indian economy will reach $5 trillion. Let's not forget the country has emerged from a tough pandemic onslaught, which led to several supply side and services disruption. I think the Reserve Bank of India has done an incredible job in navigating the economy through this period, lending all the support needed. The reforms and policies spearheaded by the Government would also start showing their impact going forward.

Add to this India's demographic dividend, a growing middle class, pick up in the rural economy, and digital advancement provides the necessary legs of growth for the country. Emerging start-up companies, a robust PLI scheme, increasing FDI, investment by the Government, are some of the factors that will take the economy to the next level.

It is true fuel prices could be a dampener since India is dependent on oil imports. It can have a significant inflationary impact. But the Government too has enough tools to tackle some of these potential inflationary pressures. For e.g. as the GST collection starts improving, we may also have a scenario where custom duty can be cut on oil prices and therefore it could be passed on to the consumers in general which has not been the case in the last two years.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Nov 3, 2021 07:48 am

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