To explore this, CNBC-TV18 engaged with Feroze Azeez, Deputy CEO at Anand Rathi Private Wealth, and Kaustubh Belapurkar, Director of Fund Research at Morningstar Investment Research.
Edited Excerpt:
Q: I want to start by taking stock of what we learnt in the year gone by. I want your thoughts on some of the major trends we saw, whether the NFO rush or thematic funds and how we should reflect on some of these trends because there was so much going on. Last year, equity funds pulled in tons and tons of money. Thematic funds, sectoral funds, they were the ones that were doing very very well. So, let’s begin with what we learnt from 2024.
Azeez: There were some really good trends which can be picked up. The one thing which stands out is the net flow in thematic schemes was exceptionally large. It was almost about ₹1,40,000 crores of net flow in thematic and sectoral funds, of which ₹55,000 crore was NFOs. Is it very healthy? We did a study. If someone were to buy the top three asset management companies, all NFOs launched for the last five years, would they beat Nifty? The good part is, they have beaten Nifty—all the NFOs of the top three AMCs.
Let’s assume SBI is the top AMC regarding assets under management. It has launched some PENs to 2025-2027. If you bought, let’s assume, ₹1 lakh in each of them, would that beat Nifty or not at a transaction level? The answer is yes, by about 4% per annum.
So, when NFOs have been used to expand the industry, it used to worry me. After seeing this data, I’m not so anxious. So, to answer your pointed question, this is the theme. Thematic and sectoral funds have got a lot of money in it.
Second, NFOs have been the theme, but it’s not been scary because, mathematically, it has expanded the industry, got so many new investors, and they’ve beaten Nifty. That’s one very important hygiene check for investing in a mutual fund. That’s one trend.
The second trend is that the SIP numbers are a reasonable barometer of India doing two things. Now, if I see that in conjunction with derivative trading. So, because we met many people on the ground, I did a little study. At five such events, I asked people how many had invested in SIP. And I also asked them the question, do you do derivatives? And we found a 73% intersection. This calmed my nerves again because it’s not two different people. They are trying to use the derivative space to quench the thirst of the adrenal. At the same time, they’re not disrespecting discipline. If it was two mutually exclusive sets, the regulator had a bigger problem.
Q: That’s a fantastic insight that those who are dabbling in F&O and doing funky trading are also keeping their SIPs intact. The SIPs are running. So that’s heartening to note. Perhaps it’s a sign of the majority of the Indian investor psyche. Kaustubh, let me come to you, your views?
Belapurkar: 2024 has been a phenomenal year for investors and asset managers because we’ve had a strong year, albeit volatility has been there. But I think the good part is that we ended the year strongly.
But in some of the studies we’ve done in the past, what we have found is thematics. The timing needs to be impeccable because they are so lumpy in their returns. Sometimes, investors will pick certain funds based on past returns, and it may not really play out. So, I think that’s one trend I would want to keep an eye on. The industry looks to fill gaps. Most asset managers already have all the diversified equity buckets. So, there are the thematics that have come into play, but I think it’s just the pace of the thematics that have come about and some of the launches, depending on the more recent performance of those strategies, and they’ve collected big money. We’ve seen ₹10,000-₹12,000 crore in funds recently launched in some of these thematic funds. I think that’s something I would want to keep an eye on. Does every investor understand what they’re getting into? I’m sure there are a lot of nuanced investors who know what they’re getting into. They want that exposure they’re getting into, but is it for all? That’s, I think, a question that I would like everyone to consider.
Watch the accompanying video for the entire discussion.
