ASK Wealth Advisors Suggest Investors To Look Beyond Large Caps

Even as uncertainties around a slowing economy and then a pandemic have been driving investors toward India's largest companies for more than two years, ASK Wealth Advisors' Somnath Mukherjee said they should look beyond traditional sectors and large-cap stocks to find potential in the ‘new themes’.

"Innovation as a theme is tremendous in India. The country is the new hotspot of innovation, same like Silicon Valley or China is," said the managing partner and chief investment officer at the wealth management unit of ASK Investment Managers, India's largest portfolio manager with Rs 18,009-crore assets. These include education, technology and consumer retail, he said, citing “enormous amount of interest from global private investors and domestic high net worth individuals".

There, however, is a catch within the domestic market. While Indian equities have been good wealth creators over the last several decades, but by no means they are the only game in town, Mukherjee told BloombergQuint in an interview. "There are other countries to invest like the U.S, Europe or parts of Asia. It is essential to start building meaningful allocation to non-Indian equities as well."

Here are the key highlights of Somnath Mukherjee’s conversation with BloombergQuint.

Asset Allocation

• Asset allocation depends on an individual profile and objective—40% in fixed income, 40% in Indian equities, 15% in offshore equities and balance keep it for the alternative products which may or may not suit whether it is private equity or long shot or investing in early-stage ventures. The portfolio could be similar to this but again depends on the individual's goal.

• When investing in fixed income, stay exclusively and almost zealously with sovereign and AAA spectrum.

Indian Market

• In India, the correlation between GDP and equity market performance was higher in the past. But from the last 15 years, the correlation has been steadily coming off, to the extent that almost in last six or seven years the correlations are almost statistically negligible.

• The point of macros not doing well hasn't matter much for Indian equities because the country has more of monopolies and oligopolies, which are high-return businesses.

• Oligopolies and monopolies that generate the maximum returns on equity, even in an economy that is not doing too well.

Flows From Mutual Funds SIPs

• Instead of looking at the current market rally and the retail participation, look at the trend back about four or five years, the chart shows an enormous spike. It is a second-order impact of a trend that probably started five to six years ago via mutual funds SIPs.

• Average monthly flows which are mainly from retail investors into equity mutual funds via SIPs is anywhere between six and eight thousand crores a month.

• Mutual funds SIP volumes have remained remarkably stable through several market volatile events.

Watch the full interview here: