Mar 17 2024, 07:53
After Sebi chief, S Naren of ICICI Prudential MF has a warning for fund managers:
S Naren says that most fund managers in the industry presently are yet to see a situation like the global financial crisis or the dotcom bust. He has a word of caution for them if they don't beat the markets, then investors will turn to ETFs or index funds.
A lot has happened over the last few days:
Sebi chief Madhabi Puri Buch had warned retail investors about a possible bubble in the small-cap and the SME IPO space. Boom! In the next two days the small-cap index fell 5%. To a large extent, this was expected.
However, on Thursday there was a remarkable recovery as the small-cap index surged by 3%, indicating a rebound from the recent dip, but it also means markets are volatile.
Over the last one year, the index was up almost 70% and trading at a PE multiple of 28x. Many fund managers had warned about this correction. But retail investors were resilient. They, as usual, were busy chasing past returns. But most investors, the way they are going, will not be bothered by a 5% correction.
Now, ICICI Prudential Mutual Fund's CIO S Naren has a warning. He not only wants retail investors to be careful, but also wants fund managers to get serious about their job.
We go 100% passive in large-cap and use active strategies for only mid-cap and small-cap exposure," said Ravi Saraogi, co-founder, Samasthiti Advisors.
He was quick to add that with time, as markets become more efficient, the alpha in mid- and small-cap funds will come down, making a case for indexing even in these segments.
"In the US, investors recognise that you should not permanently hold a small-cap portfolio without booking profits at appropriate times. In India, this approach is missing. Investors investing in small-cap ignore cycles and look at holding small-cap funds without exiting when they have run up a lot," Saraogi explained.
source:et
Mar 18 2024, 07:45
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