The mutual fund industry has been experiencing significant inflows, leading to growth opportunities for small and medium-sized fund houses. However, recent turbulence in the equity market has caused concern among first-time investors. Prateek Agrawal, MD and CEO of Motilal Oswal Asset Management, shared his insights on the current market scenario and the way forward in an interview with businessline.
Agrawal highlighted the importance of targeting alpha in the market amidst the valuation concerns in the equity market. He discussed the potential for generating excess returns by investing in newer sectors of the economy that are poised for rapid growth. Agrawal emphasized the significance of identifying opportunities in spaces like electronic manufacturing, new technology, defense, hospitals, and luxury consumption, where earnings growth is expected to outperform the index.
Regarding mutual fund schemes focusing on new technology, Agrawal attributed their success to the fund house’s disciplined investment approach, where they actively manage their portfolio to capitalize on the growth potential of investee companies. He mentioned that sectors like renewables and new technology have been particularly successful for their firm.
On the other hand, Agrawal expressed a cautious stance towards old economy sectors like steel, cement, and commodities, citing lower expected earnings growth compared to other sectors. He emphasized the importance of sustainable growth investing and valuation discipline in determining investment decisions.
Discussing the rise of passive funds, Agrawal noted the increasing relevance of these funds for high net worth investors, family offices, and institutions. He highlighted the benefits of passives for investors who can take sectoral calls themselves and mentioned the growing interest in passive funds among institutional investors.
In the context of Foreign Portfolio Investment (FPI) flows, Agrawal downplayed their impact on the market, stating that domestic fundamentals and valuations drive market movements more significantly. He suggested that FPI outflows could present entry opportunities for domestic investors.
Agrawal also shared his views on Initial Public Offerings (IPOs), highlighting the firm’s interest in this space and emphasizing the importance of selecting IPOs based on their valuation. He mentioned that many IPOs are being used as a means for promoters to distribute family wealth, and investors need to be discerning in their choices.
Finally, Agrawal discussed the potential benefits of same-day settlement for mutual funds, as it could reduce liquidity risks and improve operational efficiency. He highlighted the importance of allowing funds to reinvest realized money on the same day to enhance overall portfolio management.
In conclusion, Agrawal’s insights shed light on the dynamic landscape of the mutual fund industry and the evolving market trends that investors need to consider in navigating the current investment environment.
