'Lumpsum can fare better than SIP/STP in uptrending market'

How is your team viewing the current market valuations and preparing for possible corrections?

Aggregate valuations are higher than historical norms, especially in mid and small caps. This is partly justified by India's stronger macro outlook, particularly current account dynamics. This scenario may lead to a steady drop in India's cost of equity, supporting elevated valuations. We're measured tactically as returns have outpaced nominal GDP significantly in recent years. At Bandhan AMC, we focus on risk management with enhanced processes to manage adverse scenarios. Our Fund Casing framework defines risk boundaries for each fund, limiting deviation from benchmarks based on stock quality, market cap and sector.

Are index and factor-based passive funds a fad or a lasting investment strategy?

Index funds are becoming key components in institutional and retail portfolios, driven by increased awareness, growing performing funds and innovative products. Factor funds are growing worldwide as investors seek specific premia like value, momentum and low volatility. Savvy investors use index funds as portfolio components, efficiently combining broad market indexes with selected sectors, themes and factors.

Will AI impact your business? How and why?

We adopted AI early, initially to enhance investor service. In 2017, we launched Neo, an AI-powered equity PMS (portfolio management service). Our business intelligence platform monitors trends and responds to customer needs. AI enhances our analytics, providing data-driven insights to improve coverage and meet distribution partners' needs. We also have an AI-powered CRM, which tracks customer journeys. We're also exploring Gen-AI for innovative solutions and enhanced productivity.

Rapid-fire questions

• If your fund house had a superpower for investors, what would it be?
  
• Use 'superpowers' like compounding and cost averaging. Investors should also consider SIFI (systematic investment in fixed income) to better align their savings with their targeted allocation.
  
• The biggest mutual fund myth you'd debunk.
  
• In the SIP/ STP vs lumpsum debate, SIP/STP isn't always the undisputed winner. Lumpsum can fare better in a strong, linear upward trend. Targeted asset allocation and cash-flow availability are important factors in deciding.
  
• An unconventional asset class you'd add to your portfolio.
  
• Happy memories! Memories are unique, can grow with experiences and provide future benefits. They would be a great asset to nurture and cherish.
  
• A Bollywood movie that best represents the mutual fund industry today.
  
• Chak De! India. Our industry is creating wins, turning savers into investors, becoming a dependable capital allocator and balancing volatile FPI (foreign portfolio investor) flows.

This article was originally published on October 25, 2024.