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

Strong retail flows via SIPS are likely to continue in 2023, says AASHISH SOMAIYAA, chief executive officer, Whiteoak Capital AMC, in an interview with Lovisha Darad. He suggests investors add SIPS or STPS (spread over next six months rather than lump sum) to mid-cap 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 sentiment drives inflows into equity index funds, existing yields in the fixedincome market 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 per cent and 8 per cent, with a 5-15-year time

horizon for maturities.

Assets under management (AUM) via SIPS hit a new high in October. Do you think these retail flows will hold in 2023? What’s 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 the 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 mid-cap segment was the most favourable investment option via SIP route. Will you still advise investors to stick with mid-caps, given the recent underperformance?

The recent underperformance is all the more reason to increase commitment to mid-caps. As the Nifty scaled fresh highs this month, the wider market — represented by the BSE500, the Nifty Midcap 150 and the Nifty Smallcap 250 — was well below the previous highs.

Eventually, we anticipate either the narrow Nifty rally will abate or the broader market will 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.

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 the benchmark indices— the Nifty and the Sensex— they relate more to their movements as they translate into their portfolios. In case of simplicity and ease of buying, I suggest a broad market index fund like Nifty 500 index fund or global index like S&P 500 index fund.

More on business-standard.com Investors tend to prefer Passive Funds during market volatility. What should investors look for while selecting such funds? What’s your outlook for the markets for 2023? Is more turbulence on cards amid growth concerns? In June 2022, the Nifty50 quoted around 15,200 levels due to geopolitical tensions and weak macros. However, as clouds started to clear, the markets soared to new highs as traders bet on dovish central banks. Hence, in this current scenario, I would choose to invest in an ultrashort term fund, which gives 6-7 per cent returns, as against 3-4 per cent a few months ago. 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 small-caps and mid-caps.