The Mutual Fund Guide sat down with the Fund Manager and Chief Investment Officer for Union Mutual Fund, Mr. Vinay Paharia for a quick chat on the current economic scenario, markets and what the future looks like.
Q) Your advice to investors in the current scenario
A) As per our internal calculations, valuations are attractive. Nifty continues to trade at low double digit discount to its current fair value. Hence, we are optimistic about the medium to long term outlook for equity markets, amidst expected volatility in the short term.
Q) What are the sectors that Union AMC is overweight and
underweight on?
A) We are currently overweight in Information Technology and
Telecommunication as we feel the ongoing economic slowdown is likely to have
lower impact on these sectors. We are underweight on Financials and Consumer
Discretionary where the economic impact is tough to ascertain and the
valuations are unfavorable.
Q) Any specific advice to investors with running SIP’s
A) SIPs are a disciplined way of investing. We would advise investors
to continue with their SIPs, but be sure to review their asset allocation at
frequent intervals.
Q) Tell us a bit more about your ELSS fund
A) Our ELSS Fund is called the Union Long Term Equity Fund. It is a multi-cap fund which follows a strategy of capitalization agnostic investment approach. The fund is managed with a sector neutral investment strategy, which means its alpha is expected to be generated predominantly from stock selection attribute.
The fund manager does not intend to take any cash calls and endeavors to
invest almost all of its assets in equity or related instruments at all times. The
fund is managed with a diversified portfolio and the manager follows a low
portfolio churn strategy.
Q) How do you see Union Multi Cap fund playing out in the
near future?
A) Our multi-cap fund stands to benefit the most from our unique intrinsic value framework. Based on this framework, we can objectively assess the attractiveness between large, mid and small cap categories and allocate funds between them at opportune moments.
Also, the fund manager does not intend to
take any cash calls and endeavors to invest almost all of the fund assets in equity
or related instruments at all times. The fund is managed with a diversified
portfolio and the manager follows a low portfolio churn strategy.
Q) How important is the role of Advisors in an Investor’s
portfolio?
A) Very important. It can
be tough for investors to identify the optimum asset allocation, based on their
risk-taking ability. Besides, the Indian financial markets have shown huge
volatility historically. Maintaining the defined asset allocation amidst this
volatility can be even more challenging. Having an advisor can make the task
significantly easier.
Q) Your analysis of the impact of Covid-19 on companies
A) As is being witnessed,
the near term impact on companies’ profits is likely to be sharp due to the ongoing
pandemic. However, the impact on the fair values may be much lower than that. For
instance, the earnings for Nifty have been downgraded by 28% since 28th
February 2020#. But according to our internal estimates, Fair Value
of Nifty has fallen by about 10%. Over the medium term, this Fair Value is
likely to grow strongly driven by economic growth.
Market tracks
fair value growth, rather than earnings growth, over longer time periods.
Hence, we are optimistic on equity returns over the medium to long term period.
#Data as per Bloomberg
*Investors should consult
their financial advisers if in doubt about whether the product is suitable for
them.
Disclaimer: The views expressed or statements
made in this document are purely the views of the author (Mr. Vinay Paharia –
Chief Investment Officer of Union Asset Management Company Private Limited) and
do not necessarily represent the views of either Union Asset Management Company
Private Limited or its affiliates. The
views, facts and figures in this document are as of 5th August 2020,
unless stated otherwise.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
