Interview with Sumit Bhatnagar, Fund Manager – Equity, LIC Mutual Fund Asset Management Limited
We believe India's story is just beginning and has a long runway for growth. Factors like De-globalisation, Digitalisation, Government focus on building Infrastructure, and policies like PLI and Atmanirmbhar Bharat augur well for long-term structural growth, articulates Sumit Bhatnagar, Fund Manager – Equity, LIC Mutual Fund Asset Management Limited.
Can you provide an overview of the recently launched LIC MF Nifty Midcap 100 ETF and what prompted the company to launch this NFO?
Nifty Midcap 100 ETF is a passive fund that aims to track the constituents of the NIFTY Midcap 100 Total Return Index. Being on the ETF platform, post listing, investors can buy/sell the units of the fund on the stock exchange. LIC Mutual Fund intends to be present across all product buckets in the passive segment as well, over a period. Currently, all our passive scheme offerings are in the Large-Cap segment.
Large caps typically are proven business models, with strong teams, having balance sheet strength, but are mature enterprises having steady growth. Small caps offer better growth potential but are evolving business models, prone to volatility. Mid-Caps fall somewhere in the middle, with relatively proven business models, well-set teams, clearly laid out strategies and better growth potential. This product gives an option to investors to participate in a passive product in the Mid-cap space.
As the fund manager, what is your investment strategy for managing this fund?
Being a passively managed product, the scheme aims to track the underlying index as close as possible, to minimise the tracking error and tracking difference of the scheme.
How has been the response from investors regarding the new fund offering? Can you provide us with some numbers?
Response from retail and institutional investors has been very strong. While we cannot disclose the numbers, collections exceed our expectations.
Based on your analysis, what are the expected returns for investors, and what factors could impact these returns?
We believe India's story is just beginning and has a long runway for growth. Factors like De-globalisation, Indian Demographics, Digitalisation, China+1, Government focus on building Infrastructure, policies like Production Linked Incentives (PLI) Atmanirmbhar Bharat, and expected pick up in private sector capex, all augur well for long-term structural growth in India. These have the potential to help India sustain 10-11 per cent nominal GDP growth over the medium term and a low double-digit earnings growth trajectory over the near term.
Investors need to taper down return expectations and should not be swayed by the strong returns of last year. Having said that, given the long-term structural story India offers, a long-term investor may expect decent returns.
Over the short term, escalation of Russia–Ukraine, Israel-Hamas conflicts, Recession in the USA, Red Sea crisis, delayed interest rate cuts, Parliamentary elections in India etc. can lead to short-term volatility.
Given the current market conditions, how do you view the prospects of midcap stocks and their potential impact on the fund’s performance? What risk management strategies will you employ to protect investor capital?
This is a passively managed product. The fund objective is to track the index. This exposes the fund to market risk. In such a situation, the choice of Index becomes important. The Midcap 100 Index is very well diversified across 19 sectors and no single stock has more than 3 per cent weightage in the Index.
If a new investor wants to invest Rs 1 lakh in mutual funds, what would be your advice for them?
A new investor should ideally consult a financial advisor before making investments. These experts can perform a detailed analysis of his financial condition, and risk-taking ability and suggest suitable asset allocations. Such investors can use the SIP/SWP route to invest in equity funds.
