Edelweiss Mutual Fund, a leading fund house, is cautiously optimistic about Indian equity markets in the next 3-4 months and unequivocally positive about its prospects in the next 2-3 years. Investors should use this volatility to get into markets rather than stay away and keep faith in equities while investing in tranches in current volatile markets, its Chief Investment Officer Trideep Bhattacharya has said.

This mutual fund house is launching a new fund —Edelweiss Focused Equity Fund—on July 12 wants to scale up equities (long-only fund area). Equities (long-only funds) will be a focus area in the next few years, Bhattacharya told BusinessLine.

“ We are well represented in debt, we are reasonably well represented in hybrid (still have room to grow) and in equities (long only) we are sub scale and that is where our next focus area is”, he said.

Edelweiss Mutual Fund, which has assets under management of about ₹81,126 crore as of end March 31, 2022 is launching an equity fund after three years. The last time this fund house launched an equity fund was in February 2019 – a small cap equity fund. 

Sharing the investment strategy of the Focused Fund, Bhattacharya said that it would have a focused portfolio of 25 to 30 stocks with strong business models. It will have a benchmark and sector-agnostic approach and a multi-cap portfolio. The Focused Fund will be based on three themes —Brands (buy established and emerging brands across B2B and B2C segments); market share gainers ( buy market share leaders and emerging market share gainers) and innovators ( buy innovators, adaptors and enablers of change in business dynamics), he said. The weightage to be given to the three themes is undecided as yet, he added.

“Our next step is to have focus on long only funds in next five years. We are launching Focused fund. Focused fund was a gap in our portfolio and hence we are doing it. This new fund will complete the basket of offering in equity side. For investors looking at long term, focused investing is good way to think about — sub themes are strong wealth creator fields”, he said.

Asked whether this was the right time to be launching an equity fund, Bhattacharya said, “this is the best time to be launching an equity fund. You got to be investing when there is famine outside and you got to take money off the table when there is a feast. For a fund manager there cannot be a better time to invest in equities when Iam getting stock prices at cheap valuations. It is also good for customers”.

Equity market outlook

Bhattacharya said that January 2022 to March 2023 should be seen as a tale of two halves. The first six months should be seen as an era of volatility, consolidation and correction and come July or September 2022, the majority of the bad news would be out there — it may not be fully factored in, but it is out there.

 “Our advice to investors has been please invest in tranches rather than going lump sum. The risk to the downside is reasonable this time. Next three four months is volatile. Given the medium term outlook, we are not suggesting people to be away from market . We are telling investors to take advantage of the volatility and gradually step into the market. We are advocating buy on dip for better part of 2022”, he added.

Bhattacharya highlighted that India’s story is fairly robust over the medium term and future returns will be more driven by earnings expansion than multiple expansion. “That is regime change brought about by interest rate change. Multiple expansion would be tough to come by in the coming years.

Capex cycle 

Bhattacharya also sees a strong private investment boost in the next few years and highlighted a genuine chance of a capex cycle boost in India in the coming days. 

“Over last ten years it was government capex and private sector was absent. Private sector capex plans announced for next three years are five to six times of the public sector. Even if 50 per cent of this happens, you would see good amount of capex on the ground. From here to next elections, the roadmap is reasonably clear where the top down narrative is positive and bottom also intent is there”, he added.