“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 assorted selections (i.e. Actively managed derivatives of water) – tea, espresso, aerated water, soda, energy drink, mocktails, drinks, colas, juices and so on. Many of those could also be titillating to the tongue however the goal of quenching thirst will not be 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 available in the market? With lively funds nonetheless dominant in India, how do you see the passive investing pattern evolving within the nation?
Now we have been lucky sufficient to be related to your entire journey of passive investing in India because of affiliation with Benchmark AMC which pioneered this house in India. Therefore, now we have seen the metamorphosis of passive investing proper from the embryonic stage to now when it’s in a excessive progress part. We really feel we’re at an inflection level the place passive investing will set up itself as a core element of portfolio development.
The rationale for being a passive solely AMC is as a result of lively and passive are completely completely different asset administration philosophies and if each are supplied collectively it sends conflicting alerts to traders. Additionally, I imagine that since there may be an misguided notion that lively asset administration is extra profitable for the AMC enterprise, if each are supplied collectively then passive tends to take a again seat within the total enterprise.
Buyers are starting to know 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 progress trajectory as is being witnessed in world markets.
Your first fund, the Nifty Total Market Index Fund, tracks a broad-based index. Are you able to clarify how this index is structured and why traders ought to think about it?
We needed our maiden providing to be a product that has common acceptance, i.e., suited for every type and classes of fairness traders, 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 complete market cap. It’s subsequently really an “Funding with out Guesswork” which is our AMC’s tagline.
Shopping for your entire market eliminates the necessity to forecast which sector to spend money on, which inventory to choose, which fund supervisor to contemplate, 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 all the time have opposing or contradictory opinions and views on a lot of these items.
Subsequently, 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 assorted selections (i.e. Actively managed derivatives of water) – tea, espresso, aerated water, soda, energy drink, mocktails, drinks, colas, juices and so on. Many of those could also be titillating to the tongue however the goal of quenching thirst will not be met and furthermore they’re “excessive value” as in comparison with plain water.
If traders 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 traders is that this fund finest suited to?
In a rising financial system all segments of the market will contribute to the general GDP progress and therefore for an investor you will need to take publicity to the Nifty Whole Market Index moderately than narrower indices like Nifty 50 & Nifty 500 which by design is not going to present as a lot publicity to your entire market cap as in comparison with Nifty Whole Market Index.
Now we have analysed knowledge for near 20 years and have inferred that primarily based on 5 years and 10 years rolling returns calculated on day by day foundation, Nifty Whole Market Index has outperformed Nifty 50 and Nifty 500 for many time intervals with related stage of danger.
This fund is suited 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 person possesses a crystal ball, this sort of forecasting provides to total danger and the outcomes is probably not superior to the Nifty Whole Market Index.
Given India’s financial progress trajectory, how do you see broad-based index investing benefiting retail traders in the long run?
The biggest single MF scheme on the earth at present is the Vanguard US Whole Inventory Market Index fund. It’s also 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 development.
A typical asset allocation technique ought to comply with the core-satellite strategy. Core element of an fairness portfolio, we imagine, ought to comprise broad market cap weighted indices equivalent to Nifty Whole Market index – as this captures market price of return sooner or later (much less monitoring error).
Any deviation from broad market cap weights will end in out and underperformance – which is thought 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 additional danger over and above the market danger could not essentially end in a better anticipated return over the broad market index.
The market or systemic danger is non-diversifiable and customary to all types of investing fashion – lively or passive.
The yr 2025 is clearly turning out to be nightmarish for retail traders, notably 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 traders should proceed to construct their portfolio by way of SIP investments, as they get a possibility to profit from market volatility by accumulating mutual fund models at decrease NAV.
Purely from a valuations and anticipated earnings progress perspective, do you assume that smallcap shares, as a basket, are someplace close to the underside?
It will likely be troublesome to touch upon valuations and anticipated earnings progress. Nevertheless, 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 yr interval and XIRR return of 14.5% throughout 120 observations of 10 yr interval. Moreover, there was just one occasion of detrimental SIP returns out of 120 observations of a ten yr interval. One could look to spend money on a Smallcap class over an extended horizon by the use of SIP investments to reap the advantages of rupee value averaging.
The continuing bearish part has punished shares and sectors with respectable outlook as effectively. The place do you see alternatives to purchase the dip?
Usually we’re overjoyed when costs fall throughout services, for instance gold, property, an ongoing low cost sale of branded shirts, sneakers and so forth. When costs fall it normally advantages the buyer. Then why will we deal with equities in a different way? I imagine it’s primarily due to expertise of unfavourable outcomes which are related to inventory choosing, fund supervisor choice and plenty of different lively methods relative to broad market indices.
Nevertheless, with a broad benchmark like Nifty Whole Market Index, any market fall must be seen as akin to a “low cost sale” of product and companies. Regardless of the cause for a fall – historical past tells us that markets ultimately get better over a interval.
Buyers can subsequently both go for the SIP route or stagger their lumpsum investments over the following few weeks into broad market indices. Finally fairness returns will probably be beneficial over the long-term provided that traders benefit from such time intervals. To cite Warren Buffett – “be grasping when others are fearful”, I wish to add that traders shouldn’t be grasping for particular person shares and different alpha methods and will moderately spend money on broad market indices.
