2025 will be the year of accumulation, best time to be an investor, says Mirae's Swarup Mohanty

With the deep correction in equity markets and moderation in valuations, can we say only good days are ahead?

Markets have become relatively reasonable after the recent correction but you can't say they are cheap yet. We're talking about almost 14 percent fall in the NSE 500 Index from the highs but it's still around 40 percent up on a two-year basis.

Worldwide, the behaviour of global leaders is more or less known and their economies are reflecting their behaviour.

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There is a slowdown in earnings and urban demand in India. However, to be fair, the slowdown in urban areas has come after a sustained period of growth. So, it's not a point of concern but when it happens, markets do throw up a reaction.

When markers are in the overbought situation, easy money will go out, which is good in a way. You start knowing what is the real bottom of the market.

Fund houses like us, which had maintained a diversified position over the past two years and didn’t go overweight in certain areas, were a little behind on returns because the concept of risk was completely out of the window. We see this trend now sanitising. Also, the Nifty 50 currently is trading at 17 times from FY27 EPS (earnings per share) perspective. Since some amount of sanity has prevailed, we are very constructive on the market.

Will earnings downgrade continue this season?

There are no triggers that hint that earnings downgrade will probably change or go the other way at this moment. In the last two years, we were running practically on the central government’s capital expenditure (capex). That is why this budget becomes a little important to see their capex outlay.

We expect private capex to take off over the coming period but not immediately, because overall capacity utilisation is well below 75 percent, which is a threshold where private capex kicks in. Capacity utilisation is above 75 percent in energy or power sectors because of the government pushing in money. In fact, overall, our capacity utilisation is below pre-COVID levels.

Any pockets that you are finding good right now in terms of valuations?

We are seeing great opportunities across the market. We are finally seeing some great companies now available at good prices. We are continuously seeing opportunities rising by the day and India will remain the largest public issuance market at least for the next two years.

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I think from here on core sectors will come back into play. Growth drivers of consumption and infrastructure, both digital and physical, are totally intact. When you look at banks, there are some names available at great prices and healthcare will continue to perform well. In my opinion, boring core sectors will start coming back into prominence.

Smallcaps have corrected more than largecaps in 2025. How should one play this theme?

If you look at mutual fund industry inflows over the past two years, a bulk of the SIP (systematic investment plan) investments was in smallcaps. When you look at the fall in this segment, there's a perpetual buyer for those stocks, which were not there earlier. Once there was a run for smallcaps in earlier times, it used to be a free fall. Now there's a buyer on a monthly basis.

So, the behaviour of investors from here on may not have any correlation to the behaviour in the past. However, this rationale would be tested over a sustained period of fall but because of the retail nature of the money that has come in, it will take time to wipe out these huge SIP inflows.

Mirae India MF didn’t launch an active smallcap fund earlier but has now. What has changed?

We have always said that you need to have an infrastructure at the backend to launch any fund, be it smallcap of any other category, especially, when you start managing a smallcap fund, you need to have a very differentiated backend from an analyst to a fund manager. So, we launched this fund when we got Varun Goel (fund manager of Mirae Asset Small Cap Fund) on board. Also, if you track his career, it has been more on that side of the capitalisation table.

Do you think the active side of fund management will matter more going ahead?

We are asset managers and we are agnostic of passive or active strategies. We will back our active side to beat the benchmark and we will put a passive fund at a reasonable cost that will give you a good tracking error. Also, I'm fortunate to be sitting with the fund management team, which is agnostic of the passive launches. That's a separate side of the business which will grow on its own merit. As the market starts expanding, there is space for everybody because portfolios and the nature of preference for investors will also be different.

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What we are seeing right now is a very interesting. For the first time in my three decades in this industry, three generations are investing simultaneously in the market. Typically, it used to be two generation. The son or daughter (has) a totally different choice of products. Their risk-taking ability, knowledge and approach to investing may not have any correlation to the last two generations. We will see more and more products pushing towards the high-risk side to attract or keep the interest of this young generation in our industry.

What policy changes does the mutual fund industry want in the Budget?

The government needs to do something as the sentiment is a little bad in the country. Since there are no elections in front of you, the government has the scope to implement a big agenda this year.

Last year, I was expecting the rollback of long-term debt taxation but it was not mentioned. Further, the removal of the indexation benefit was a shocker. I believe indexation plays a big role in making the layman aware of the time value of money. I can only hope that it comes back in this budget.

Any other policy measures that can be expected?

If India aspires to be a manufacturing nation, the amount of allocation that goes to healthcare and education must rise. It would be difficult to become a large manufacturing hub with 35 percent of the population malnourished.

Also, as a principle, educated people adapt to new skills quickly. Therefore, the importance of education is very high. Look at China. They've invested very heavily in these two aspects.

One piece of advice to retail investors today?

Investors today are spoiled for choice and it's the best time to be an investor in this market.

The stock market has become reasonable or trending towards becoming fair or cheap. Also, the marginal safety is higher than what it was last year. These are times when you need to really accumulate the market. It's the year of accumulation in my opinion.

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From the debt side, because of interest rate cuts now looking a reality, possibility of getting returns are more visible on the debt side than on the equities this year. Also, gold remains in favour. It is probably the best year for asset allocation, and the asset allocators will win, while market timers will lose terribly.

So, allocate prudently and accumulate in 2025, and it'll only strengthen your portfolio.

My only caveat is that, typically, investors tend to redeem old investments and buy something new. Don't try to time the market by redeeming something and buying something else. It never works in the long run. The best way of increasing your portfolio is still market appreciation.