'Valuations high in most sectors, barring a few like Financials'

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

The current market valuations appear elevated across most sectors, barring a few like Financials. At Quantum AMC, We have reallocated some capital from expensive sectors like Consumer Discretionary to private sector banks. Many portfolio companies have crossed our fair value estimates, leading to relatively higher cash levels. Higher cash and increasing weight in relatively cheaper market segments would position us well for the long term.

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

Passive funds tracking and investing in Nifty, Sensex and NSE/BSE 200 are becoming increasingly popular among long-term investors. New and experienced investors are now making some allocations to funds tracking popular indices. Investors are churning allocations based on the valuation and performance of the sectoral indices. The popularity of passive funds will be proven once legal suits are initiated by investors on investment advisors for investments per their advice, resulting in a downside in the active funds' portfolio.

Will AI impact your business? How and why?

AI is set to significantly impact several areas of the mutual fund business in India. Some of them include investment strategies and portfolio management, customer service, risk management, operations and cybersecurity. Overall, AI is poised to transform the mutual fund industry in India by enhancing efficiency, improving customer experiences, enabling more sophisticated investment strategies and threat detection/response.

Rapid-fire questions

• If your fund house had a superpower for investors, what would it be?
  'The guardian of wealth' - a superpower that ensures investor's wealth is protected from market crashes, inflation and other financial uncertainties. It acts like a shield, safely preserving and growing their assets, regardless of the economic climate and conditions.
  
• The biggest mutual fund myth you'd debunk.
  'Mutual funds are only for experts / hard to understand.' Many believe that mutual funds are too complex for beginners or require significant initial capital. In reality, mutual funds are designed to be accessible to a wide range of investors, including those with little experience and smaller amounts of money to invest. They offer built-in diversification and professional management, making them a simple and effective tool for long-term wealth-building, regardless of how much you start with.
  
• An unconventional asset class you'd add to your portfolio.
  Land/property and gold.
  
• A Bollywood movie that best represents the mutual fund industry today.
  Tiger Zinda Hai.

This article was originally published on November 06, 2024.