Some sectors, companies still have attractive valuations: PPFAS MF’s Rajeev Thakkar

The Indian stock market indices are trading at an all-time high buoyed by domestic and global liquidity and there is a consensus between analysts and market participants that the capital market is in an overbought region. Yet new investors, especially retail investors, are still jumping on the gravy train. The big question is whether there is any value still to be generated hereon to make money?

Some certainly think there is still money to be made even at this juncture. Rajeev Thakkar, chief investment officer at Parag Parikh Financial Advisory Services (PPFAS), which runs one of the most popular flexi-cap mutual fund schemes, told a business newspaper that one can still find a few gems.

“There are still sectors and companies which have been ignored by the market and where valuations are still attractive. While the task of finding attractively valued companies has become difficult, it is not the case that there are no companies which can be invested in,” he told The Economic Times.

Will the tide turn soon?

Thakkar said that central banks internationally have to balance inflation concerns with the flip side of supporting economic activity and employment. When the economy is seen to be self-supportive, they will withdraw the additional liquidity.

“However, that in itself should not be seen as a worry. To give an analogy in terms of a car and driving, central banks will ease up on the accelerator. It does not mean that they will hit the brakes hard and bring the vehicle (economy) to a stop,” according to Thakkar.

On flexi-cap funds

Talking about the sudden interest in flexi-cap funds, Thakkar said historically most mutual funds were diversified equity funds and there was no categorisation by market capitalisation. The categorisation of large-cap, mid-cap and small-cap funds is a more recent phenomenon and even then, the schemes with flexibility of investing in companies across the spectrum have always been popular.

“In any case, in flexi-cap funds, a majority of the investments are in larger companies given that most of the profit pool is with the large companies. However, it also gives the fund management team the flexibility to invest in attractive mid and small-cap companies,” according to Thakkar.

Minimum five-year investment horizon

“From our side, we have been regularly communicating that the minimum investment horizon for equity investing should be five years and that investors should temper their expectations and not be anchored to the past three- or five-year returns,” he added.

Thakkar said PPFAS has been communicating the suitability of its flexi-cap scheme and the investment approach and has exit loads for the first two years post-investment to deter short-term investors in dabbling in its fund. 

The mutual fund scheme, one of the top performers among peers, has also been pushing investors to make periodic purchases through systematic investment plans and systematic transfer plans instead of betting large sums at one go.

Success mantra

Investors who are coming into the market need to mentally plan with a long-term horizon in mind, according to Thakkar. Banking on small savings schemes, bank deposits and gold will not help in optimising wealth creation and one needs to get into equities for that but one needs to be prepared for withstand short-term volatility.

Thakkar shared a few nuggets of wisdom starting with creating a proper asset allocation across liquid, debt, equity and real assets (real estate, gold etc.) based on one’s profile, risk tolerance ability and preference, age and goals.

Then they need to stick to the plan instead of getting swayed by short-term ups and downs.
Investors also need to invest regularly rather than trying to time the markets in terms of booking profits and then investing large lump sums, according to him.