The key highlights that I just mentioned is that the smallcap fund side is continuing to see strong inflows. Is that a bit of a worry now or is this a trend that would continue? Even a smallcap would continue to grow at a faster pace now?
Anthony Heredia: I do not think it is a worry because you will notice that for the last three or four months, the percentage contribution of smallcaps in the total flows has been dropping. Correspondingly, we are seeing a clear increase in appetite for flexi cap, multi cap, large and mid cap funds. It is a natural transition, which is probably valuation led, etc, for investors at large to perhaps think beyond small cap funds.
But at the same time, there is a lot of underlying belief in India’s long term potential, which gets translated into a lot of smaller companies becoming attractive. I do not expect smallcap flows to suddenly die. But I clearly see that flows getting more evenly distributed between small, flexi and multi cap to be the trend for the next three to six months for sure.
SIPs are at record level numbers. It is Rs 17,000 crore above that level for the second time this time for December. Do you think these levels are something that will continue or is it the peak for SIP flows or higher up that you are expecting?
Anthony Heredia: In the case of SIPs as an industry, we have miles to go. It is the most easy and convenient option for retail investors to participate in equity. The message is becoming more and more accepted with retail investors. So to my mind, every other month, you are going to see a new peak in SIPs. I believe that SIP flows will trend to double the overall flows of the industry over the next three to five years. When I talk to investors, the comfort they have towards SIPs is probably 2x the comfort they have towards funds in general. I would believe SIPs will continue to drive the overall flow into the industry for not just the next three to six months, but for years to come.
We spoke about that smallcap fund. You mentioned how the percentage overall in the total inflows towards smallcaps is reducing. But, where do you see that shift that would continue happening? Is it going to be mainly largecap focused or even flexicap? That has started seeing a lot of inflows as well. Where would you see the major inflows shifting from smallcaps to?
Anthony Heredia: As a house, that is what we have been recommending to our clients. It is not in black and white. I should stop looking at smallcaps and I should start looking at the exact opposite, which is largecaps. There is an understanding that there is opportunity between small, mid, as well as largecaps.
Logically, flexi and multi-cap becomes the more ideal product to transition to rather than jumping directly from small to largecaps. But I see a lot of our industry peers talking to clients on the same tenor. The best thing to do is to stop worrying about which cap is going to do better, which sector is going to do better. There are tremendous opportunities across sectors and therefore stay diversified and buy flexi and multi-caps. Let the portfolio managers decide which capitalization, which stock, which sector makes the most sense. You will see that grabbing a much larger proportion of flows in the next three to six months.