Akhil Chaturvedi, Chief Business Officer, Motilal Oswal Asset Management Company (AMC) suggests this is the time for portfolio rebalancing and retail investors must take cover in pockets of safety like large-caps and flexi-cap funds.
In a fireside chat at the third edition of the Moneycontrol Mutual Fund Summit, Chaturvedi said that between active and passive mutual funds, retail investors must exercise given the market levels and should be more on the active side in this market.
The demand for passive mutual funds has grown exponentially over the past few years and the assets under management in this segment has grown to Rs 10.2 lakh crore or 17 percent of the total market share.
Over the past few years, Indian equity markets have grown at an exponential pace. Attracted by the returns, the monthly systematic investment plans (SIPs) have hit Rs 23,00 crore, while the number of mutual fund account have reached nearly 20 crore.
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According to Chaturvedi, investors need to tape their expectations from the markets going ahead. “However, when you want to taper down return expectations, investors are not interested,” he said.
Chaturvedi suggested that rebalancing portfolio at regular intervals to where these is value and safety can mitigate some of the risk.
On valuations in different sections of the market, he said that fund managers have a take job at hand between taking a call between cash call or pockets of opportunity. “Fund managers need to be very agile,” he said.
On risks to the bullish stance in equity markets, Chaturvedi said that the trends in India was largely stable, while there are lot of risks emanating from outside India in the form of geopolitics and US elections.
On asset allocation, Chaturvedi said that gold has played an important role over the last five years.
“Investors need to have between 10 percent and 20 percent allocation to gold. Gold should be there irrespective of the market cycle and best way is sovereign gold bonds or gold exchange-traded funds (ETFs). We also have a combination of gold and silver funds available in the market,” he said.
Talking about debt investing, Chaturvedi said that numbers show that fixed-income mutual fund category from the retail investing perspective is close to dead.
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The Finance Act 2023 stated that mutual fund schemes with less than 35 percent allocation to equity – essentially debt funds – and a few other fund categories will be taxed as short-term capital gains, irrespective of the holding period.
“Large part of that liquidity has shifted to equity to hybrid funds,” Chaturvedi said. On rise in alternative investments, Chaturvedi said that while mutual funds have been the backbone of wealth accumulation, different investment strategies can be tried via alternative assets by those who have higher risk appetite.
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