'Do not see any reason for SIP flows to change course significantly'

After SIP AUMs claimed a fresh high in October this year, retail flows are likely to sustain in 2023 as well. AASHISH SOMAIYAA, chief executive officer, WhiteOak Capital AMC tells Lovisha Darad in an interview that investors can continue and add SIPs or STPs (spread over next six months rather than lump sum) into midcap funds, with a five year time horizon. Edited excerpts:

AMFI data shows that equity index funds have underperformed debt index funds over the past four months. What's behind the shift?

While market sentiments drive inflows into equity index funds, existing yields in fixed income markets drive flows into debt index funds. The flows into debt index funds are driven by target date funds as investors try to clock yields ranging between 7-8 per cent, with a 5-15 years time horizon for maturities

WATCH: With markets near all-time highs, which sectors should you bet on?

 

SIP AUM hit a record new high in October. Do you think these retail flows will hold in 2023? Your overall outlook on the MF industry?

SIPs and investing in mutual funds via SIPs have become ubiquitous and now is a widely appreciated method of investment into equity markets for the long term. I do not see any reason for SIP flows to change course significantly. Barring swings of sentiment which impact the level of commitment and accretion to investment commitments for the industry, I don’t see any big change in this preferred mode of investing.

A report by WhiteOak Capital showed that the midcap segment was the most favourable investment option via SIP route. Would you still advise investors to stick with midcaps given the recent underperformance?

The recent underperformance is all the more reason to increase commitment to midcaps. As Nifty scaled fresh highs this month, the wider market - represented by BSE500, Nifty Midcap 150 and Nifty SmallCap 250 were well below their previous highs. Eventually, we anticipate either the narrow Nifty rally would abate or the broader market will soon catch up. In either case, investors can continue and add SIPs or STPs (spread over next six months rather than lump sum) into midcap funds, with a five year time horizon.

 

Investors tend to prefer Passive Funds during market volatility. What should investors look for while selecting such funds?

I don’t think passive funds necessarily do much better or much worse during market volatility. But I can be fairly certain that from these levels, active funds are likely to do better if the index moves down. Hence, there is no basis to believe that passive funds will do better amidst volatility. Since most people track benchmark indices like Nifty or Sensex, therefore, they relate more to their movements as it translates into their portfolios. In case of simplicity and ease of buying, I would suggest a broad market index fund like Nifty 500 index fund or global index like S&P 500 index fund.

What's your outlook for the markets for 2023? Is more turbulence on cards amid growth concerns?

In June 2022, Nifty50 quoted at around 15,200 levels due to geopolitical tensions and weak macros. However, as clouds started to clear, the markets soared to new heights as traders bet on dovish central banks. Hence, in this current scenario, I would choose to invest in an ultra short term fund, which gives 6-7 per cent returns, as against 3-4 per cent a few months back. But if the markets swung back to June 2022 levels, I would allocate in either a mid or smallcap fund or any fund which allocates at least 40-50 per cent money in smallcaps and midcaps.

 

WhiteOak Capital has launched four products since July, how has investors' response been? Are there more funds in the pipeline?

At present, we completed the launch of FlexiCap, MidCap, TaxSaver, and LargeCap and we have always had Liquid and UltraShort Term Fund. The total assets are near around R 2,000 crore and we are inching towards 1 lakh investors. We already have regulatory approvals for a Balanced Advantage Fund, Large and MidCap Fund. That apart, we also plan to launch a SmallCap Fund subject to regulatory approvals, which will take only SIPs and STPs.