Latest news with #NiftyMidcap150Index
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Business Standard
4 days ago
- Business
- Business Standard
Suitable bets for cost-sensitive investors seeking market returns
The new fund offer of Tata Nifty Midcap 150 Index Fund is open. A large number of fund houses already offer midcap and smallcap index funds and exchange-traded funds (ETF s) based on popular indices such as the Nifty Midcap 150 and the Nifty Smallcap 250. Investors must understand the pros and cons of investing in passive funds in the mid- and smallcap segment before taking the plunge. Outperformance becoming harder Historically, active mid- and smallcap funds have outperformed their benchmarks over the long term. However, this trend appears to be changing. 'The latest S&P Indices Versus Active (SPIVA) report for 2024 indicates a significant decline in the outperformance of mid- and smallcap funds compared to their respective indices. This indicates that generating alpha in these segments is becoming increasingly challenging,' says Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors. A recent analysis by Ladderup Asset Managers showed that, over the past 10 years, on average, 49 per cent of actively managed midcap funds underperformed the Nifty Midcap 150 Index. In passive funds, investors need not constantly monitor the fund manager's performance. 'They do not have to worry about the fund underperforming relative to the market,' says Niranjan Avasthi, senior vice-president, Edelweiss Mutual Fund. They can stay invested in the same fund for long and focus on their asset allocation. 'These funds enable new investors, those without an advisor, or those short on time and expertise to participate in the market effortlessly,' says Ariahnt Bardia, chief investment officer and founder, Valtrust. Raghvendra Nath, managing director, Ladderup Asset Managers, highlights that key person risk is eliminated in these funds. In active funds, if a star fund manager departs, there is the risk of the fund's performance getting affected. Chintan Haria, principal – investment strategy, ICICI Prudential Mutual Fund, points out that investors can earn market-equivalent returns at a low cost. Passive funds stay true to their mandate. 'When investors choose a midcap or a smallcap passive fund, 100 per cent of their investment is made in the chosen category. It will not have any investment in largecap or smallcap stocks,' says Arun Sundaresan, head – ETF, Nippon Life India Asset Management. The fund's strategy remains unchanged throughout its life. By investing in a diversified index, investors reduce their risk of overexposure to a single stock or sector. Passive funds always maintain full exposure to the market, with no attempt to exit or take cash calls during downturns. 'They do not try to time the market. This can work well over the longer term,' says Sundaresan. Risk of higher tracking error Liquidity in mid- and smallcap stocks is lower than in largecaps. 'This can lead to higher tracking error and tracking difference for passive funds in these segments, and impact the investor's actual returns compared to the index,' says Avasthi. Haria says that smallcap indices often include illiquid stocks, leading to wider bid-ask spreads and pricing gaps in ETFs. Mid- and smallcap segments are more volatile than largecap. During sharp corrections, these funds decline in line with their index and offer no downside protection. 'Without an active fund manager to course-correct or take cash calls, drawdowns can be deeper when using an index fund or ETF for the midcap and smallcap category,' says Haria. Passive fund managers are bound to the index. 'Businesses that are not profitable may get purchased by these funds simply because they are part of the index,' says Dhawan. Bardia points out that these funds can at times include companies with poor fundamentals or governance. Indices rebalance at set intervals. 'The index may continue to hold stocks that are driving down the portfolio's return. Active funds, where the fund manager actively tracks the performance of his portfolio stocks, can avoid this,' says Nath. Who should go for them? Passive funds suit long-term investors seeking low fees and independence from fund manager calls. 'It is ideal for disciplined systematic investment plan (SIP) investors with a 7–10 year horizon,' says Haria. Dhawan says investors comfortable with market returns in the mid- and smallcap segment and sensitive to cost would find passive funds appealing. Nath adds that investors who prefer simplicity, are new to investing, or lack the knowledge or guidance to choose active funds may go for these funds. Who should avoid them? Investors seeking downside protection or short-term alpha should consider active funds. 'Tactical investors may struggle due to the illiquidity of ETFs in these segments,' says Haria. Investors looking for alpha generation may prefer active funds. 'They must, however, be prepared for the risk that in the pursuit of alpha generation, mid- and smallcap active funds may actually underperform the indices,' says Dhawan. These funds may also not suit investors with low risk tolerance or short investment horizons. How to select an index fund or ETF Before investing, Haria advises checking tracking error, expense ratio and assets under management (AUM). 'High tracking error defeats the purpose of passive investing,' he says. In ETFs, trading volume is an important factor. 'Higher the trading volume of an ETF, lower would be the impact cost of a transaction. Check for trading volume data and impact cost details available on the websites of stock exchanges,' says Sundaresan. Bardia suggests selecting funds that offer efficient replication, have low costs, and are managed by fund houses with strong execution capability in the passive space.
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Business Standard
6 days ago
- Business
- Business Standard
New to Midcaps? Tata's Passive fund offers low-cost, diversified exposure
Tata Asset Management on Tuesday launched a new passive fund that gives investors a low-cost way to ride the midcap growth wave. The Tata Nifty Midcap 150 Index Fund, open from June 2 to June 16, 2025, tracks a diversified portfolio of mid-sized companies that are rapidly gaining market share across sectors. What is it? This is a passive index fund that aims to mirror the performance of the Nifty Midcap 150 Index, which includes 150 mid-sized companies across 20 sectors. These are businesses that are not yet giants like large caps but have shown consistent growth and potential. Key dates: NFO (New Fund Offer) period: June 2 to June 16, 2025 Minimum investment: ₹5,000 (and in multiples of ₹1 thereafter) Exit load: 0.25% if redeemed within 15 days Why Midcaps Matter to You Midcap companies often lie at the heart of India's economic momentum — they're agile, growth-oriented, and often industry leaders in the making. Historically, midcaps have outperformed both large caps and small caps: 1-year rolling return: Midcap index delivered 21.89%, vs 16.37% by Nifty 50 3-year rolling return: Midcaps returned 15.8%, vs 12.38% by large cap (Source: NSE, ICRA-MFI, Apr 2005–Apr 2025) What you are investing in: This open-ended index fund mirrors the Nifty Midcap 150 Total Return Index (TRI), offering exposure to 150 mid-sized companies ranked 101st to 250th by market cap in the Nifty 500 universe. Fund Managers: Kapil Menon & Rakesh Prajapati (combined 40+ years of experience) Why choose this fund? Diversification: The fund offers exposure to 74 industries, including those not represented in large-cap indices — like chemicals, realty, capital goods, and more. Growth Potential: Over the last five years, 17 midcap companies graduated to the large-cap category, showing the potential for wealth creation. Lower Costs: Being passively managed, it avoids the higher fees of actively managed funds. Risk-Spreading: Instead of betting on one stock, your money is spread across 150 companies. Plus, it avoids stock-specific risks. Who should invest? Long-term investors looking to benefit from India's evolving economic landscape Investors who prefer low-cost, rule-based investing Those seeking diversification beyond blue-chip stocks SIP (Systematic Investment Plan) investors aiming for compounded returns over 5–10 years Point to note: Midcap investments come with higher short-term volatility. Stay invested long enough to ride out the ups and downs. 'Midcaps represent India's growth frontier. Through the Tata Nifty Midcap 150 Index Fund, investors can get access to potential growth sectors and companies that are integral to India's next phase of economic expansion,' said Anand Vardarajan, Chief Business Officer, Tata Asset Management. 'The fund is suitable for long-term investors seeking a blend of growth and diversification, backed by discipline of passive investing.' The Nifty Midcap 150 index comprises companies across 20 sectors and 74 basic industries. "Notably, 39 industries present in the midcap space but absent in the large cap space, account for over 40% of the total weight of the index, highlighting the unique diversification benefit that the segment offers. Nifty 100 is considered as a universe for large caps and Nifty Midcap 150 is considered as universe for mid-caps). Over the past five years, 17 companies from the midcap segment have transitioned into large caps, illustrating the segment's capacity to aim for wealth creation," the company said in a release. Why Midcaps Make Sense in 2025 While large caps offer stability, midcaps provide growth. These are companies typically valued between ₹33,000 crore and ₹1 lakh crore—big enough to be established, but small enough to grow rapidly. Key insights from the fund presentation: Midcaps have historically outpaced GDP growth, with their market cap-to-GDP ratio doubling in the last 10 years. They are less sensitive to foreign investor outflows compared to large caps, as promoter holding is higher (~55%). In the last 5 years, 17 midcap companies became large caps, showcasing the segment's transition power.
Mint
02-05-2025
- Business
- Mint
Your Questions Answered: I want to invest in midcap indices. Please elaborate on the Nifty Midcap 50 Index?
Arindam Banerjee, Salt Lake City, Kolkata Investing in mutual funds has become a popular choice for individuals seeking to grow their wealth while diversifying their portfolios. Among the various options available, mutual funds that track the Nifty 50 Midcap Index have gained significant attention. These funds offer exposure to midcap companies, which are often considered the sweet spot between stability and growth potential. Let's dive into the details of these funds and why they might be worth considering. The Nifty Midcap 50 Index is a benchmark that represents the performance of 50 midcap companies listed on the National Stock Exchange of India. These companies are ranked between the top 101st and 150th in terms of market capitalisation. The index is designed to capture the growth potential of mid-sized companies that are well-established but still have room to expand. Nifty Midcap 50 Index includes the top 50 companies from the Nifty Midcap 150 Index, based on full market capitalisation. These companies are carefully selected to ensure the index accurately reflects the midcap segment of the market. Below, we have mentioned the key criteria to be part of Nifty Midcap 50 Index. Market capitalisation: Companies must rank among the top 50 in terms of full market capitalisation within the Nifty Midcap 150 Index. Preference is given to stocks that have derivative contracts available on the NSE. Liquidity: The liquidity of a stock is a critical factor. Companies must demonstrate sufficient trading activity to ensure that their inclusion does not hinder the index's performance. The total traded value of all index constituents over the last six months is considered. Free-float market capitalisation: The index uses free-float market capitalisation, which excludes shares held by promoters and other strategic investors, to determine the weight of each stock. Sector representation: The index aims to provide a balanced representation of various sectors within the midcap segment, ensuring diversification. Corporate governance: Companies must adhere to high standards of corporate governance and comply with regulatory requirements. Periodic review and rebalancing: The Nifty Midcap 50 Index undergoes periodic reviews to ensure it remains representative of the midcap segment. During these reviews, companies that no longer meet the eligibility criteria are replaced. New companies that fulfil the criteria are included. Adjustments are made to account for corporate actions such as mergers, acquisitions, and spin-offs. Mutual funds tracking the Nifty Midcap 50 Index are designed to replicate the performance of the index, providing exposure to a diverse range of midcap stocks. Below, we have mentioned the key advantages of investing in these funds and why they are worth considering for your portfolio. Access to high-growth companies: Midcap companies, often referred to as the 'sweet spot' of investing, lie between largecap giants and smaller firms. They are established enough to offer stability but still have significant growth potential. Mutual funds tracking the Nifty Midcap 50 Index grant investors access to these dynamic companies, which can be a great addition to a growth-oriented portfolio. Diversification benefits: The Nifty Midcap 50 Index includes 50 midcap companies across various sectors. By investing in a fund that tracks this index, you can benefit from diversification, spreading risk across industries and reducing the impact of individual stock volatility. Cost efficiency: Mutual funds tracking indices like the Nifty Midcap 50 Index are often passively managed. They aim to mirror the index's performance rather than actively choosing stocks. As a result, these funds tend to have lower expense ratios than actively managed funds, making them a more cost-effective option for investors. Professional management: Even though these funds follow an index, professional fund managers handle the investments. They ensure the portfolio aligns with the index and adjust as needed, such as rebalancing the portfolio during index changes or corporate actions. Transparency: Index funds are known for their transparency. Since they follow a specific benchmark, investors can easily understand the composition and performance of the fund. This clarity helps investors make informed decisions and track their investments effectively. Consistent performance: By tracking the Nifty Midcap 50 Index, these mutual funds aim to replicate the index's performance. Historically, midcap indices have delivered robust returns over the long term, making them a reliable choice for investors seeking consistent growth. Ideal for long-term investing: Midcap funds are well-suited for long-term investors. Over time, the inherent growth potential of mid-sized companies can translate into significant returns, especially when compounded. Investing in these funds aligns with a long-term wealth creation strategy. Reduced volatility compared to smallcaps: While midcap stocks are more volatile than largecaps, they are less risky compared to smallcap stocks. This middle ground makes mutual fund tracking the Nifty Midcap 50 Index appealing to investors who want growth with moderate risk levels. While mutual funds tracking the Nifty Midcap 50 Index offer several advantages, they are not without their drawbacks. Understanding these cons is crucial for investors to make informed decisions and align their investments with their financial goals and risk tolerance. Below, we have listed the key risk associated with investing in mutual funds tracking Nifty Midcap 50 Index: Higher volatility: Midcap stocks are more sensitive to market fluctuations compared to largecap stocks. This heightened volatility can lead to sharper price swings, making these funds riskier for investors who prefer stability in their portfolios. Economic sensitivity: Midcap companies often rely heavily on domestic demand and have limited resources compared to largecap firms. This makes them more vulnerable to economic downturns, which can adversely affect the performance of mutual funds tracking the index. Limited downside protection: Unlike actively managed funds, index funds do not employ strategies to mitigate losses during market downturns. This passive approach means that investors are fully exposed to the index's performance, whether positive or negative. Sector concentration risks: While the Nifty Midcap 50 Index provides diversification, certain sectors may dominate the index. This concentration can increase the risk associated with specific industries, especially during periods of sector-specific challenges. Suitability for long-term investors: Due to the inherent volatility and economic sensitivity of midcap stocks, these funds are better suited for long-term investors who can withstand short-term fluctuations. Short-term investors may find the risk levels unappealing. The Nifty Midcap indices are benchmarks designed to represent the performance of midcap companies listed on the NSE. While both the Nifty Midcap 100 Index and the Nifty Midcap 50 Index focus on midcap stocks, they differ in composition, selection criteria, and purpose. Let's explore these differences in detail. Nifty Midcap 100 Index: This index comprises the top 100 midcap companies ranked between 101st and 200th in terms of market capitalisation. It provides a broader representation of the midcap segment. Nifty Midcap 50 Index: This index includes the top 50 midcap companies selected from the Nifty Midcap 150 Index based on liquidity and market capitalisation. It offers a more focused representation of midcap stocks. Nifty Midcap 100 Index: With a larger pool of companies, this index provides broader sector representation, capturing the performance of midcap stocks across multiple industries. Nifty Midcap 50 Index: Due to its smaller size, this index may have limited sector representation compared to the Nifty Midcap 100 Index. Nifty Midcap 100 Index: The broader composition of this index may result in lower volatility compared to the Nifty Midcap 50 Index. Nifty Midcap 50 Index: The focus on fewer stocks can lead to higher volatility, making it more sensitive to market fluctuations. Nifty Midcap 100 Index: Ideal for investors seeking diversified exposure to midcap stocks and long-term growth potential. Nifty Midcap 50 Index: Suitable for traders and investors looking for liquidity and actively traded stocks, often used for derivative trading. Investing in index funds tracking the Nifty Midcap 50 Index is a popular choice for individuals seeking exposure to midcap companies. However, understanding the taxation rules associated with these investments is essential for effective financial planning. Below, we delve into the tax implications of such investments in detail. Capital gains tax is applicable when you redeem your index fund units. The tax treatment depends on the holding period: Short-term capital gains (STCG): If the units are held for less than 12 months, the gains are classified as short-term capital gains. STCG is taxed at a rate of 20% under Section 111A of the Income Tax Act. Long-term capital gains (LTCG): If the units are held for more than 12 months, the gains are classified as long-term capital gains. LTCG is taxed at a rate of 12.5% for gains exceeding ₹ 1.25 lakh in a financial year. Investing in mutual funds tracking the Nifty Midcap 50 Index can be a rewarding venture, but it requires careful consideration and research. These funds provide exposure to midcap companies, which are known for their growth potential and moderate risk levels. Below, we outline the key factors investors should evaluate before investing. 1. Investment goals and horizon: Before investing, define your financial objectives and investment horizon. Are you looking for long-term capital appreciation, or do you have short-term financial goals? Midcap funds are best suited for long-term investors who can withstand market fluctuations and benefit from the growth potential of midcap stocks. 2. Risk tolerance: Assess your risk appetite. Midcap stocks are more volatile than largecap stocks, which means they can experience significant price swings. Ensure that your risk tolerance aligns with the inherent volatility of these funds. 3. Fund performance: Evaluate the historical performance of the mutual fund. Look for consistency in returns over different timeframes (1 year, 3 years, 5 years) and compare the fund's performance to its benchmark index and peer group. Keep in mind that past performance does not guarantee future results. 4. Expense ratio: The expense ratio is the annual fee charged by the fund for managing your investment. Lower expense ratios are preferable, as they reduce the cost of investment and improve net returns. Compare the expense ratios of different funds tracking the Nifty Midcap 50 index. 5. Tracking error: Tracking error measures how closely the fund replicates the performance of the Nifty Midcap 50 Index. Lower tracking errors indicate better alignment with the index. Choose funds with minimal tracking errors to ensure accurate representation of the index. 6. Fund manager expertise: Although index funds are passively managed, the fund manager plays a crucial role in maintaining the portfolio and executing trades. Research the fund manager's track record and expertise in managing index funds. 7. Liquidity: Check the liquidity of the fund. Funds with higher asset sizes tend to have better liquidity, making it easier to buy or sell units without impacting the fund's performance. 8. Tax implications: Understand the tax treatment of your investment. Capital gains tax is applicable when you redeem your units, and dividends are taxed as per your income tax slab. Familiarise yourself with these rules to optimise your post-tax returns. 9. Sector allocation: Analyse the sector allocation of the fund. Ensure that the fund provides balanced exposure to various industries within the midcap segment, reducing the risk of sector-specific challenges. 10. Investment mode: Decide whether to invest through a lump sum or a Systematic Investment Plan (SIP). SIPs allow you to invest smaller amounts at regular intervals, reducing the impact of market volatility and promoting disciplined investing. As of March 28, 2025, the Nifty Midcap 50 Index has given a five-year compounded annual return of 36.74%. On the other hand, as of March 28, 2025 Nifty Midcap 100 Index has given a five-year compounded annual return of 34.58%. Please see below the top two index mutual funds tracking the Nifty Midcap 50 Index: Name Expense Ratio 1 Year Return Axis Nifty Midcap 50 Index 0.26% 8.48% Kotak Nifty Midcap 50 Index Fund 0.25% N.A. Source: AMFI website. All data as of 15 April 2025 Note: Past performance is not an indication of future returns. Mutual funds tracking the Nifty Midcap 50 Index offer a unique opportunity to invest in mid-sized companies with significant growth potential. They combine the benefits of diversification, professional management, and cost-efficiency, making them an attractive option for investors. However, as with any investment, it's crucial to conduct thorough research and consult with a financial advisor to align your investments with your financial goals. Disclaimer: Investing in mutual funds involves risks, including potential loss of principal. Please consult with a financial advisor before making any investment decisions. Kuvera is a free direct mutual fund investing platform. First Published: 2 May 2025, 12:10 PM IST
Economic Times
01-05-2025
- Business
- Economic Times
ETMarkets PMS Talk: Growth, margin expansion, and valuation - the 3 pillars behind Purnartha's stock selection
In this edition of ETMarkets PMS Talk, we catch up with Saurabh Pathak, Head - Investment Counsellor at Purnartha PMS, to understand the driving forces behind the firm's consistent outperformance across market cycles. ADVERTISEMENT At the heart of Purnartha's investment approach lies a disciplined framework built on three core pillars — Growth, Margin Expansion, and Valuation. Pathak walks us through how this philosophy shapes stock selection, fund strategy, and risk management, particularly in volatile times. He also sheds light on the positioning of their flagship Dynamic Midcap Strategy, sectoral preferences, and how investors are reacting to today's global uncertainties. Edited Excerpts – Q) Thanks for taking the time out. Please take us through the performance of Purnartha funds for FY25 and which fund stood out and why? A) Fund Performance Overview:All our equity funds have delivered strong performance over the one-year time frame, while our concentrated schemes have also outperformed over the two-year period. This consistent performance is primarily attributed to our strict adherence to core investment philosophies and timely decision-making. ADVERTISEMENT • The outperformance of Pratham & Vision strategies was driven by strong stock selection, while the success of the Dynamic Midcap strategy was the result of a proactive sector allocation approach combined with investments in companies boasting healthy order books and timely execution.• We remain highly confident in our ability to continue delivering outperformance relative to benchmarks across all schemes going forward. ADVERTISEMENT Q) What is the primary investment objective of the Purnartha Dynamic Midcap Strategy?A) Our Dynamic Midcap Funds are designed to capitalize on India's long-term, multi-decade growth story, aiming to generate an alpha of 3%–4% over the Nifty Midcap 150 Index. ADVERTISEMENT The strategy is thoughtfully crafted to navigate market uncertainties by blending both Growth and Value investing styles, resulting in a balanced and resilient portfolio.Q) What are the key sectors in which the Purnartha Dynamic Midcap Strategy is invested, and what is the sector-wise exposure as a percentage of net assets? ADVERTISEMENT A) Currently, our portfolio is diversified across approximately 10 sectors, with strategic allocations in key areas such as Financials (~18%), Healthcare (~10%), Capital Goods (~9%), FMCG and IT (each ~8%).We've aligned our sector weights with the benchmark. For example- we have increased our exposure to defensive themes in Nov/ Dec 2024 while trimming our allocation to Capital Goods in response to evolving market dynamics. Q) Small & midcaps was one space which was beaten down badly in the last few months. How should one look at this theme for FY26? A) Mid and Small Caps have faced headwinds over the past six months, primarily driven by stretched valuations, concerns around the US elections, and tariff-related response, we have adjusted our portfolio stance—reducing small cap exposure from 30% to approximately 16%, while maintaining our mid cap allocation in the range of 45%–49%.While we remain structurally positive on the small and midcap segments, our current focus is on selective opportunities within continue to invest in fundamentally strong companies with 2/3 years of revenue visibility, robust balance sheets, healthy cash flows, and the ability to self-fund future capex without relying on debt. Q) What are the key sectors in which the Purnartha Dynamic Midcap Strategy is invested? A) We continue to maintain a well-diversified portfolio across 9–10 sectors, with significant allocations in key areas such as Banking & Financials, Healthcare, and Capital Goods. Q) How do you evaluate companies for investment across different funds? A) Purnartha Pratham & Vision Strategy: Our investment philosophy is based on three key drivers — Growth, Margin Expansion, and Valuation. Companies that meet any two or more of these criteria are subjected to a detailed research and screening process before being included in the portfolio. The primary objective is to identify businesses capable of sustaining multi-year growth. • Dynamic Midcap Strategy: This strategy follows the GSM framework — Growth, Strategic Investment, and Margin Expansion. Companies that meet any one of these parameters are considered for further Fund Manager aims to maintain exposure to all three pillars (GSM), adjusting allocations dynamically based on the prevailing market environment and sentiment. Q) What is your take on markets for FY26 and did you also tweak your strategy to counter tariff related volatility in the system? A) Dynamic Midcap Strategy Outlook:Our Dynamic Midcap Fund operates under the GSM Philosophy (Growth, Strategic Investment, and Margin Expansion). This approach enables the fund to maintain a balance between growth and value style investments within the same portfolio, providing stability even during periods of market response to current market conditions, we have increased allocation toward defensive sectors and India-focused themes, while using cash as a tactical tool to seize opportunities arising from market fluctuations.• Market Outlook (FY26):For FY26, we anticipate that the equity asset class will deliver moderate returns compared to the strong gains of the past couple of years. However, we continue to expect corporate profit growth of 10–12%, which aligns with nominal GDP growth projections. Q) How do you manage risk across different funds? A) Purnartha Pratham & Vision Strategy:o A significant portion of the portfolio is allocated to large-cap companies, ensuring liquidity at all times and providing opportunities to capitalize on market three-driver approach — Growth, Margin Expansion, and Valuation — guides the portfolio construction and allocation. We manage idiosyncratic risk by adhering to strict investment rules and executing a disciplined exit strategy whenever initial investment assumptions are no longer valid.• Dynamic Midcap Strategy:o Mandatory trimming of position where a stock breaches 12% of the current portfolio valueo Stock allocation is an indication of risk-return tradeoffo Exposure to a wider spectrum of sectors/sub-industrieso Managing exposure to raw material (commodities), geographies, size, styleo While debt is allowed till 0.5x to equity – in the current 'tariff uncertainty' ~60% of the portfolio is allocated to net cash companies.• Purnartha One strategy:o Risk management is an inherent feature of the Purnartha One strategy, achieved through diversified exposure across different asset classes and timely portfolio rebalancing.o Our approach is further strengthened by the VMS framework — focusing on Valuation, Macro Outlook, and Sentiment. This three-factor framework helps to actively hedge risks and maintain portfolio stability across varying market conditions. Q) There is too much chatter on Gold – how do you see this asset class for investment? A) Gold Investment Strategy — Purnartha One:As part of our Multi-Asset Strategy under Purnartha One, we maintain an allocation to Gold in the range of 4–6%. We view Gold primarily as a crisis hedge, rather than a high-return asset.• Given the ongoing global economic uncertainties, demand for Gold is expected to remain strong. We consistently recommend that investors allocate a portion of their portfolio to Gold at all times. The objective is not to maximize returns fromGold, but to provide a cushion and enhance portfolio resilience during periods of heightened volatility and uncertainty. Q) What are the queries that you have been getting from your clients? A) Investor Sentiment in Current Times:Today's investors find themselves at a crossroads — concerned about global uncertainties such as tariff wars, yet confident in India's long-term economic growth story. While this duality has not deterred participation in equities, it has led to a more cautious investment approach, limiting aggressive segment of investors remains confused, struggling to choose between different investment styles, philosophies, and asset classes available in the market. Despite the broader index recovery, many remain apprehensive, preventing them from making decisive investors often find it challenging to identify investment solutions that align with their goals and provide timely results. Although there is a growing urgency to create passive income through investing, prevailing macro and microeconomic fears cloud judgment, often leading to panic-driven decisions. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Time of India
22-04-2025
- Business
- Time of India
From Trump tariffs to interest rate cycles: portfolio analytics in action to create wealth
(The author Nimish Shah is the MD- Wealth Management & Analytics at LGT Wealth India) In the last few years, Indian equities have performed very well. The Nifty 50 Index has delivered an excellent 5-year (as of 15 April 2025) price return of 21.19% CAGR. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Moose Approaches Girl At Bus Stop In Rajshahi - Watch What Happens Happy in Shape Undo During the same 5-year period, the broader market has performed even better. The Nifty Midcap 150 Index (31.95% CAGR), the Nifty Smallcap 250 Index (34.71% CAGR), and the Nifty Microcap 250 Index (47.69% CAGR) have created wealth for long-term investors. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. However, some investors are unnerved due to current market volatility . The year-to-date (1 Jan to 15 Apr 2025) returns of the above indices range from -1.34% for the Nifty 50 to -15.71% for the Nifty Microcap 250 Index. During the same period, gold and fixed income have delivered good returns. This highlights the importance of portfolio analytics . Live Events Portfolio analytics highlights the key trends and provides valuable insights that are important in investment decision-making. Role of portfolio analytics As the complexity of the Indian capital markets increases, the need for effective tools to analyse client portfolios is becoming increasingly important. Increasing market volatility is leading to fluctuations in portfolio values, which is unnerving clients. For example, in November 2024, Donald Trump was elected the US President. Since then, the Indian and global stock and debt markets have become highly volatile due to the threat of tariffs imposition and their repercussions. In this environment of heightened uncertainty, clients want to know the contributors to the rise in risk on their portfolio, which can be best provided by in-depth portfolio analytics. Portfolio analytics helps break down complex and voluminous investment data into bite-sized information. The information further helps comprehend the risks and returns in a portfolio across asset classes and products. Asset allocation: Portfolio analytics at a broader level At a broader level, analytics across asset categories brings forth asset allocation. The asset categories can include equity (listed and unlisted), fixed income, gold and other commodities, REITs and InvITs, hybrids and multi-asset class products, alternatives, cash, etc. A periodic review with portfolio analytics can identify any deviation from the risk appetite, and corrective action can be initiated. For example, if equity outperforms significantly in a particular year, its weight in the overall portfolio will increase. As a result, the weights of other classes will go down, and overall asset allocation will deviate from the base ratio. Portfolio analytics helps identify such deviations and initiate action to revert to the base asset allocation. Applying quantitative methods and using modern-day technology, portfolio analytics can analyse various parameters to bring forth the contributors and detractors to risk and returns. When backed by quality research, portfolio analytics can help objectively analyse an investment portfolio. Equity analytics Once your broad level asset allocation is sorted, portfolio analytics can help you delve into each asset class. For example, portfolio analytics for equity investments would aggregate investment at an individual stock level. Underlying investments of mutual funds and PMS would be aggregated with direct stock holdings. The resultant analytics would bring forth various aspects that affect risk and return. The equity portfolio can be designed using the core and satellite model. The core part can consist of exposure to broader indices based on market capitalisation. The satellite part can include exposure to sectors, themes, smart beta strategies, etc. One can start with the market-cap allocation across large, mid, small and micro-cap stocks. It helps understand whether the equity portfolio suits a client's investment risk appetite. The allocation to respective categories (large, mid, small, micro, etc.) can depend on various factors. Some of these include investor's age, risk profile, investment time horizon, major life events, category valuations, etc. Currently, many portfolios are skewed towards mid and small cap stocks. It is due to the superior performance of these categories in the last few years, as discussed at the beginning. However, these categories are currently seeing far more volatility than large-caps, thus unnerving investors. Now, let us move from the core to the satellite part of the equity portfolio. Equity analytics can also bring forth the sectoral allocation, thereby giving insights on under or over-allocation to sectors. For example, in the current environment, with tariff threats looming, exposure to export-oriented businesses may be reduced. On the other hand, investors can increase exposure to domestic-oriented businesses that are relatively less affected by tariffs. Portfolio analytics driven appropriate allocation to sectors based on the situation can bring more stability to the portfolio. After reviewing broad market capitalisation and sectoral exposures, with portfolio analytics, you can assess stock-level exposures to balance portfolios. Analytics can help gauge the concentration risk due to over or under-exposure to a fund manager, sector or stock. A long-term attribution and contribution analysis helps understand the performers and laggards in a PMS or a fund. And, an over-lap analysis of the underlying stocks of a fund and PMS brings forth the schemes with a large percentage of common stocks between them. When such varied analytics are available to an advisor and investor, it leads to effective, well-informed, unbiased decisions. Fixed-income analytics Fixed-income analytics will aggregate the underlying debt investments across mutual funds, direct bonds and fixed-income PMS. Credit analysis becomes even more relevant when the analytics shows the portfolio exposure across the credit curve AAA & G-Sec to C & D rated papers. Analytics can aggregate investments at a corporate group level and ensure credit risk caps and floors to manage risk. Portfolio duration and average maturity profile are analysed to stress-test the sensitivity of the fixed-income portfolio to interest rate movements. Effective decisions can be taken to increase or decrease duration and credit profile depending on the expected economic situation. For example, currently, we are in an interest rate easing cycle. Thus, exposure to long duration bonds that benefit more from interest rates moving lower can be increased. Portfolio analytics is important and indispensable In today's world of ever-changing market dynamics and geopolitical uncertainties, portfolio analytics is important and indispensable. Key trends and insights from a good-quality portfolio analytical report help investors manage portfolio risk, return and complexity effectively. ( Disclaimer : Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times )
