Equity markets continued their impressive climb in 2024 so far, with almost all equity indices at All Time Highs, or close to All Time Highs (ATH). While current set of investors, that have large exposures to equities can celebrate and bask in these returns, the reality is that for most Indian equity households, equity is still significantly under-penetrated. In our report - Are Indians making their Money work? (link - https://tinyurl.com/mrywrujv) we have analysed how Indian household savings has been allocated, and while there has been a growing trend towards greater financialization of savings and embracing of equity markets, the numbers are still very small. Less than 5% of overall household wealth is in equity markets, a far cry from many developed markets, as the report outlines. We also outline within the report that even if the proportion allocated to financial assets (including fixed deposit, cash etc) gets reallocated to equities, fixed income mutual fund, gold - there can be meaningful improvement in overall returns to the household. We strongly urge the reader to go through the report to gain multiple insights, so as to have a prudent asset allocation framework.
Given that equity markets are at ATH, there is generally a tendency to be wary of further investment. Reality is that markets tend to be ATH at different points in time, more often than what is generally perceived. Between 2005 to 2023, markets are at ATH or close to ATH almost for more than 1000 trading days (out of total 5000 trading days). More often than not, investing in the past at various ATH has actually been rewarding, even as memories keep gravitating towards investing in peak of 2008. In the investment journey, drawdowns (or falls from ATH) are part and parcel of market and cannot be washed away. However, purely obsessing on such a possibility distracts the investor from a holistic approach to asset allocation and the need for various assets including equities for their long-term objectives. To help with these behavioural constructs, SEBI has created categories and solutions including asset allocation solutions like (Balanced Advantage Funds/ Multi Asset Allocation funds) or the simple design of Systematic Investment Plans.
Overall market volatility has been low since 2020, where even a small correction has been vociferously bought. This has been in an environment with significant geo-political developments and global macro uncertainties. One shouldn't be lulled into thinking that such a low volatile environment can prevail for ever. Similarly, it may be naïve to extrapolate near-term past track record of various asset class and securities' performance. There are enough studies to show that category toppers in various mutual fund categories keep changing almost on an annual basis. Given this, to take a forward looking construct on positioning, the factsheet becomes a very useful tool to go under the hood of various portfolios.
To help investors in this endeavour, Aditya Birla Sun Life Mutual Fund is happy to share the consolidated Top 75 positions of entire fund house in this factsheet. Across fund houses, we have seen that Top 75 positions account for about 80% of total corpus of fund house. Thus, focus on these stocks gives an understanding of broader processes, philosophy of fund house.
During the period from Sep 23 to April 24, there were 37 stocks in which our fund house added positions. The largest increase in exposures were in stocks like Bajaj Auto, AU Small Finance Bank, Avenue Supermarts Ltd, ONGC, Zomato, Whirlpool, NLC India, Voltas, Shriram Finance, Max Financial Services Limited. Many of these have been purchased in a counter-cyclical manner - in essence, not buying when these stocks were in momentum. During this period, the Top 10 stocks in which fund house has reduced positions have been Phoenix Mills, Tata Steel, Glenmark, Honeywell Automation, Century Textiles, Bharat Electronics, Hindustan Unilever, Crompton Greaves, Bharat Forge, Apollo Hospital. Most of these names have performed significantly in last year (and more), and the fund managers have booked profits in many of these names.
We sincerely, hope this analysis provides you a better appreciation of various equity offerings of Aditya Birla Sun Life Mutual Fund. Equities are an asset class to fulfil long term goals, while there is a prospect of increased volatility (be it event lead due to elections or global geo-political developments), we remain positive on longer term construct. Just like in test cricket, there is fine balance between opening batsmen (whose primary role is to defend against new ball), middle order (whose primary role is to have long partnerships and score most runs) and the tail (who may be looking to improve strike rate)- our portfolios in Aditya Birla Sun Life Mutual Fund also have a balance between risk management (benchmark awareness), high conviction core portfolio (whose primary role is to compound wealth over long period of time, with low portfolio churn) as well as satellite positions (where we look to express views on top-down assessment of risk, faster churn in portfolio and tactical calls).
Happy investing!
Source: Jefferies, Morgan Stanley, ABSLAMC Research
The sector(s)/stock(s)/issuer(s) mentioned in this article do not constitute any research report/recommendation of the same.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
