Money9 Exclusive Interview | SIP or Lumpsum? Ace fund manager Nilesh Shah draws ‘Kumbhakarna’ analogy

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With stock markets hitting new highs in the past few months, many mutual fund investors have chosen to redeem their units and book profits. Nilesh Shah, Managing Director, Kotak Mutual Fund, believes that equity investment is like a boxing match since investors can’t just throw punches, but should also be able to take a few.

In an interview with Money9, Shah said the fund house is bullish on industrials and home improvement segments.

Edited excerpts:

Q: With the Sensex rising over 52,000 points, is it a good time for investor to enter the market or should they wait for a correction?

Shah: More people have lost money (in notional gains) waiting for correction than when corrections have actually happened. There is a saying that when you have the money, it is the best time to invest. To add to that, when you have a financial plan and money, it is the right time to invest. Index levels do/should not matter for investors. What matters is index valuations.

Q: Which route should a potential investor take – lumpsum or systematic investment plan – in this market?

Shah: If you have the ability to be like Kumbhakarna (be a long-term investor), then lumpsum can be a good option. Similarly, if the market is cheap from a valuation point of view like between March and August 2020, again one can look at lumpsum investment. At current level of fair value market, it will be more appropriate to invest through the systematic transfer plan or systematic investment plan basis. At Kotak Mutual Fund, we have created two funds —Kotak Balance Advantage Fund and Kotak Asset Allocator Fund for lumpsum investments. In these funds, we do the asset allocation between debt and equity based on market valuations. Hence, investors can use them to invest a lumpsum amount.

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Q: Do you think that the rally in the Sensex will continue for some more time or will there be consolidation?

Shah: No one can predict the stock market, at least in the short-term, since there could be events that can impact the market. Equity investment is like a boxing match. You need to enter the ring with an ability to take punches, not just give them. So, if you cannot withstand the ups and downs, and both will happen more often than not, you should not enter this ring. Markets will move in line with corporate profits. We estimate that over the medium or long term, corporate profits will move up. And hence, markets are also expected to go up in line with corporate performance.

Q: With the domestic mutual fund investors booking profits for the last few months, are they following the right strategy?

Shah: Investors are booking profits as they had invested at lower levels in the first half of 2020. Some investors are also shifting money to other asset classes like real estate. As long as investors are following a disciplined financial plan, they are following a right strategy.

Also Read | Nilesh Shah on how the market scenario is going to pan out in 2021

Q: Which sectors do you think will lead the next rally?

Shah: We remain bullish on home improvement sector and industrials in the current environment.