The large and midcap space registered a near 50% rise on a month-on-month basis at about Rs 500 odd crore that was received as inflows. Are we still in that phase of the market where only largecaps are finding flavour?
Yes, of course. Investors’ favourite pastime is to chase what is doing well, recent performance. But if we are looking at the scale of inflows, Rs 500 crore more coming into midcaps is not a big deal but midcaps have corrected substantially. There is a growing feeling that midcaps will look cheap. There is also a growing feeling that largecaps are high quality stocks and good companies are very expensive. So, it may not be a good way to participate in the market to make money over the long term.
In that sense, there is a limited opinion in the market that it is about time, but the majority of investors behave differently. They keep chasing what is doing well and they keep away from things which are not doing well or where they have lost money recently.
In case of hybrid funds, we had a bit of outflow there on a continuous basis. But in the last couple of months what has happened is that only the hybrid category has seen an outflow of Rs 2,000 crore. Should investors now avoid this category altogether?
No.I do not know the reason behind the hybrid category losing money, because I do not see any tangible reason why people should be exiting a balance fund or even an equity income fund. I do not have a precise understanding why they are doing so, but I think hybrid category remains attractive for what it actually delivers.
It gives you in a very neat package both equity and debt, a relatively stable take on growth without the corresponding volatility. What crosses my mind right now is that hybrid funds do not go up very sharply. They are never top of the charts and they are never at the bottom of the charts and that is the deal. Any new investor should start with a balanced fund and if investors are getting disenchanted because they thought that they have to be high performance too, maybe it was sold wrongly.
There is another reason why there could be an outflow from balanced funds because a lot of balanced funds were sold two years ago on high dividend yield and because of the struggling market, the dividend has come down on balanced funds and many investors bought it for that. Even the dividend taxation regime changed the outflow on balanced funds on account of wrong selling two years ago.