“Nifty Whole Market Index is akin to plain consuming water; if the target is to quench thirst (i.e., beat inflation) then one can not go about experimenting with the varied decisions (i.e. Actively managed derivatives of water) – tea, espresso, aerated water, soda, energy drink, mocktails, drinks, colas, juices and many others. Many of those could also be titillating to the tongue however the goal of quenching thirst just isn’t met and furthermore they’re “excessive value” as in comparison with plain water,” he says. Edited excerpts from a chat with Bhatia:
Angel One AMC is a passive-only AMC. What impressed this distinctive positioning out there? With lively funds nonetheless dominant in India, how do you see the passive investing development evolving within the nation?
Now we have been lucky sufficient to be related to your complete journey of passive investing in India as a consequence of affiliation with Benchmark AMC which pioneered this house in India. Therefore, we’ve seen the metamorphosis of passive investing proper from the embryonic stage to now when it’s in a excessive development section. We really feel we’re at an inflection level the place passive investing will set up itself as a core element of portfolio building.
The rationale for being a passive solely AMC is as a result of lively and passive are completely totally different asset administration philosophies and if each are provided collectively it sends conflicting alerts to buyers. Additionally, I imagine that since there may be an faulty notion that lively asset administration is extra profitable for the AMC enterprise, if each are provided collectively then passive tends to take a again seat within the total enterprise.
Buyers are starting to grasp that almost all of lively funds in most segments, i.e., massive, mid, small and flexi underperform their respective benchmarks over long-term (if comparability is made on apples-to-apples foundation), and it will intensify as extra monetary inclusion occurs. Therefore the so-called dominance of lively is being significantly challenged by passive and I’m optimistic that the proportion of passive funds in India will see an identical development trajectory as is being witnessed in world markets.
Your first fund, the Nifty Whole Market Index Fund, tracks a broad-based index. Are you able to clarify how this index is structured and why buyers ought to take into account it?
We needed our maiden providing to be a product that has common acceptance, i.e., suited for every type and classes of fairness buyers, each retail and HNI.The index is obtainable by Nifty Indices, it’s free float weighted, rebalanced half yearly, just like the methodology adopted for different broad market indices and is a mixture of Largecaps, Midcaps, Smallcaps and Microcaps unfold throughout a complete of 750 shares. Nifty Whole Market Index covers almost 93% (as of twenty eighth Feb 2025) of whole market cap. It’s subsequently really an “Funding with out Guesswork” which is our AMC’s tagline.
Shopping for your complete market eliminates the necessity to forecast which sector to spend money on, which inventory to choose, which fund supervisor to think about, whether or not one ought to go for big caps or small caps and so forth. All this forecasting is a danger and as we all know many consultants will at all times have opposing or contradictory opinions and views on a lot of these items.
Due to this fact, if I have to use an analogy it’s that Nifty Whole Market Index is akin to plain consuming water; if the target is to quench thirst (i.e., beat inflation) then one can not go about experimenting with the varied decisions (i.e. Actively managed derivatives of water) – tea, espresso, aerated water, soda, energy drink, mocktails, drinks, colas, juices and many others. Many of those could also be titillating to the tongue however the goal of quenching thirst just isn’t met and furthermore they’re “excessive value” as in comparison with plain water.
If buyers need only one product to take publicity to equities as an asset class then it’s Nifty Whole Market Index – therefore the hashtag for our maiden providing is #HarPortfolioKeLiye.
How does this fund examine with present index funds monitoring Nifty 50, Nifty 500, or different broader indices? What sort of buyers is that this fund greatest fitted to?
In a rising financial system all segments of the market will contribute to the general GDP development and therefore for an investor it is very important take publicity to the Nifty Whole Market Index reasonably than narrower indices like Nifty 50 & Nifty 500 which by design won’t present as a lot publicity to your complete market cap as in comparison with Nifty Whole Market Index.
Now we have analysed knowledge for near 20 years and have inferred that based mostly on 5 years and 10 years rolling returns calculated on each day foundation, Nifty Whole Market Index has outperformed Nifty 50 and Nifty 500 for many time durations with related degree of danger.
This fund is fitted to all investor classes – each HNI & retail, because it eliminates the guesswork of which sectors, shares, segments, fund managers will outperform sooner or later. Since no one possesses a crystal ball, this type of forecasting provides to total danger and the outcomes might not be superior to the Nifty Whole Market Index.
Given India’s financial development trajectory, how do you see broad-based index investing benefiting retail buyers in the long run?
The most important single MF scheme on the planet at the moment is the Vanguard US Whole Inventory Market Index fund. Additionally it is out there within the ETF format. This itself tells us that broad market cap weighted indexing will proceed to rule the roost and would be the central core of portfolio building.
A typical asset allocation technique ought to observe the core-satellite method. Core element of an fairness portfolio, we imagine, ought to comprise broad market cap weighted indices resembling Nifty Whole Market index – as this captures market fee of return sooner or later (much less monitoring error).
Any deviation from broad market cap weights will end in out and underperformance – which is understood in hindsight.
Therefore broad market cap weighted indexing eliminates the extra non-systemic danger of investing, which is inventory choosing danger and fund supervisor choice danger. This further danger over and above the market danger might not essentially end in the next anticipated return over the broad market index.
The market or systemic danger is non-diversifiable and customary to all types of investing type – lively or passive.
The 12 months 2025 is clearly turning out to be nightmarish for retail buyers, significantly these closely invested in smaller shares. As excessive PE shares have moderated fairly a bit, do you see extra ache forward or gradual restoration as we step into FY26?
You require a crystal ball to foretell the markets. I imagine buyers should proceed to construct their portfolio by SIP investments, as they get a possibility to profit from market volatility by accumulating mutual fund items at decrease NAV.
Purely from a valuations and anticipated earnings development perspective, do you suppose that smallcap shares, as a basket, are someplace close to the underside?
It will likely be tough to touch upon valuations and anticipated earnings development. Nonetheless, from April 2005 to February 2025, Nifty Smallcap 250 Index has delivered a mean rolling SIP XIRR return of 14.9% throughout 180 observations of 5 12 months interval and XIRR return of 14.5% throughout 120 observations of 10 12 months interval. Moreover, there was just one occasion of unfavorable SIP returns out of 120 observations of a ten 12 months interval. One might look to spend money on a Smallcap class over an extended horizon by means of SIP investments to reap the advantages of rupee value averaging.
The continued bearish section has punished shares and sectors with respectable outlook as nicely. The place do you see alternatives to purchase the dip?
Usually we’re overjoyed when costs fall throughout services and products, for instance gold, property, an ongoing low cost sale of branded shirts, footwear and so forth. When costs fall it normally advantages the buyer. Then why will we deal with equities otherwise? I imagine it’s primarily due to expertise of unfavourable outcomes which might be related to inventory choosing, fund supervisor choice and lots of different lively methods relative to broad market indices.
Nonetheless, with a broad benchmark like Nifty Whole Market Index, any market fall needs to be seen as akin to a “low cost sale” of product and providers. Regardless of the cause for a fall – historical past tells us that markets ultimately get well over a interval.
Buyers can subsequently both go for the SIP route or stagger their lumpsum investments over the subsequent few weeks into broad market indices. Ultimately fairness returns shall be beneficial over the long-term provided that buyers reap the benefits of such time durations. To cite Warren Buffett – “be grasping when others are fearful”, I wish to add that buyers shouldn’t be grasping for particular person shares and different alpha methods and may reasonably spend money on broad market indices.