Invest 80%, keep rest of corpus aside for corrections: Mirae's N Surana

Indian markets are holding on despite ongoing global chaos, thanks to supportive cyclical and structural factors, says Surana

People making lump-sum investments should keep aside 20 per cent of their corpus for deployment during corrections, said Neelesh Surana, chief investment officer, Mirae Asset Investment Managers. Surana told Abhishek Kumar in an interview why financials are fund managers' favourite and sectors likely to do well. Edited excerpts from the interview:

The market is upward after a roller coaster ride for over a year. Is it a sign of better days for equity investors?

Indian markets are holding on despite ongoing global chaos, thanks to supportive cyclical and structural factors. Cyclically, many large sectors are poised to mean revert on growth, which coupled with a healthy balance sheet of corporates and banks will aid earnings revival. Structurally, India has strong and sustainable drivers for long-term growth. Given fair valuations, staggering investments through SIPs should be the preferred way to commit long-term allocation to equities.

When the markets were red hot last year, many investors shifted their money from equity funds to balanced advantage and other hybrid schemes. Now that the market has gone corrected, should investors shift their money to equity funds?

Given the macro uncertainties, the market seems to be fairly priced from a near-term perspective. Hence, investors looking to add fresh investments could either opt for balanced advantage funds or invest in equity funds through the SIP route. While making a lump-sum investment, keep aside 20 per cent of the corpus for a possible correction.

Scheme selection is a tough task in the small-cap category (three-year return of small cap schemes ranges from 52 to 21 per cent CAGR). How should investors make a selection?

There are many professional advisors, agencies and websites which use a host of parameters to suggest the right scheme. 

Investors should look at consistent rolling 5-year returns, ratios related to risk framework, investment manager track record, etc. Divergence amongst small-cap schemes is generally significant, and thus investors should focus on longer-term risk adjusted returns.

Most overseas markets have gone through bigger corrections than India. Should investors raise their international bets?

The Indian market remains the best for core long-term allocation, purely on account of superior growth potential. Informed investors can look to commit about 10-15 per cent in overseas markets. Ideally, they should go for large cap US funds, like the S&P top-50 ETF. US funds come with the additional benefit of currency depreciation.

How is global investors’ India positioning?

In 2022, foreign institutional investors have pulled out $22 billion from the Indian market due to macro volatility and India being perceived as relatively expensive. It seems that global fund managers have been slow to respond to the large increase in India’s weight in the emerging market (EM) index. India’s weight in MSCI has increased significantly in the last one year.

Financial stocks have been fund managers' favourite. Will it remain so?

Yes, financials have been our preferred theme over the last 1-2 years and they remain so. They have further room to grow on account of credit growth and reasonable valuations. We are also positive on healthcare, auto ancillaries and consumer discretionary. Among the value stocks, we are positive on select gas utilities.

As a fund manager, what is your present investment strategy?

We have been following a two-pronged approach: a sort of barbell strategy where we make significant allocation towards high quality companies and the rest in 'deep in value' businesses. Our cash holding remains sub 3 per cent across funds.

Passive schemes are gaining traction after reports that active schemes are underperforming. What is your view on active funds?

We believe that both will co-exist as a combined investment approach makes better sense. While 100 per cent active makes one vulnerable, a complete passive portfolio can only deliver average returns. Active funds still have a lot of opportunities.