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Business News/ Mutual Funds / Retail participation in mutual funds still below global average, says G Pradeepkumar of Union AMC

Retail participation in mutual funds still below global average, says G Pradeepkumar of Union AMC

He shares his views on the valuation of large cap stocks, sectors that are likely to do well in the near future, and about the future scope of algorithmic trading. He also shares investing lessons for young investors

He says that India is going to be a great growth story in the next 20 years. Premium
He says that India is going to be a great growth story in the next 20 years.

Large cap stocks are not cheap anymore, but are not in a bubble zone either. And their valuation may continue to rise further on growing inflows from overseas investors, believes G Pradeepkumar, CEO of Union Asset Management Company (AMC). 

In an interview with MintGenie, he also shares the sectors that are likely to do well in the near future. He also highlighted that greater participation of retail investors in mutual funds is a positive trend, although there is still a long way to go with mutual fund penetration hovering around five percent only.

Edited Excerpts:

Which are the sectors that – you think – would do well this year and the following year?

The sectors that are likely to do well include hospitals, branded pharma, and power sector. Our view is that the listed companies would generate healthy returns. Another sector we are positive on is real estate where we are undergoing a multi-year upward cycle. Additionally, the telecom sector is also expected to do well.

We are seeing a bull run and the Nifty 50 has already broken multiple records. Do you think that most blue-chip stocks are also trading higher as of  now, besides the stocks in small cap categories? 

Large cap stocks are not cheap, but they are not in the bubble zone. They are expensive. There are domestic investors who have been participating big time. There is a significant amount of institutional money flowing into large caps. 

Structurally, there is a change and foreign inflows are likely to pick up. Overseas investors would put a good chunk into large caps. Liquidity is in favour of large caps. So, moving forward, earnings growth will pick up, interest rates are expected to come down when inflation comes under control.

Inflows into mutual fund houses have been rising consistently month after month, particularly among retail investors. Now, 60 percent of assets are owned by retail investors, and 84 percent of individual assets are in the form of equity. What do you make of this trend?

It is a positive trend, but in our view — we are just scratching the surface. Penetration of mutual funds is just five per cent and the other ratios such as mutual funds-to-GDP and mutual funds-to-FD are still below the global averages. 

There is a lot of headroom to grow further in the next few years. Investors have realised that investing in equity is good for long-term wealth creation, and SIPs (systematic investment plans) are a good tool for this. 

Moreover, when it is part of the market cycle where more retail money comes in, thus eventually making the market more stable.

Earlier, Indian markets (without significant retail investors' money) could be moved by foreign investors and markets used to be more volatile. However, what we also need are more opportunities to make investments. 

What are your views on algorithmic trading and its future? Do you think this would soon get prevalent?

Well, what would happen is that fund managers and investment professionals would start using automated tools rather than getting replaced by them. Investing is not just about numbers but about managing your behaviour too.

What advice would you share with young investors who are in their mid-20s about investing habits that they should imbibe?

Start as early as you can and invest regularly. One should be disciplined since there are no shortcuts to wealth creation. It is also advisable to take professional help from a distributor or advisor. 

ALSO READ: Why are Mutual Fund houses limiting one-time investments in their smallcap fund?

Union AMC recently rolled out a business cycle mutual fund. How is it different from the current schemes in the fund house’s basket?

In business cycle funds, we tend to concentrate on the sectors which we believe have greater chances of making money in the near or medium term. 

For example, if we have a negative view on a particular sector, we may have no exposure to it, and similarly, we may go overweight on another sector if we have a more positive view on the same. 

Is there any specific advice that you want to give to conservative investors?

For a variety of reasons, we are getting into a different growth orbit where the traditional way of looking at the market may not be right. 

So, we can’t look at the future just the way we saw the past. India is going to be a great growth story in the next 20 years.


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Published: 01 Mar 2024, 12:34 PM IST
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