Avoid MF schemes that haven’t seen a bear market

A computer science graduate from Bangalore University and a management graduate from PSG Institute of Management, Pankaj Bansal has close to 14 year of experience in portfolio management services. He has been into PMS sales, portfolio management of high networth individuals, institutions and corporate.

Bansal started his career with ICICI Bank as an investment manager, handling HNI clients in as many as seven branches. Before floating his investment advisory boutique firm Avid Wealthcare, which manages nearly Rs 100-crore assets of its clients, Bansal had successful tenure with Kotak Securities, UTI Mutual Fund and Sanlam Investments & Advisors. He is now managing director of Avid Wealthcare.

Bansal says trade war has clouded the global economic outlook. So far, the direct impact of tariffs levied by the US and China on trade channels has been limited. However, the indirect impact, through damage to business confidence and higher financial costs, could be sizeable and is being indicated in the quarterly conference calls of the US-listed companies in the form of higher input costs. A sharp reversal of macro variables in favour of the Indian economy, like the fall in oil prices in a few weeks and rupee appreciation, has led to a bounce back in the Nifty50 from 10,000 levels to 10,600. However, multiple risk events lined up globally and locally can spook the market in the coming months.

Besides, the country is entering an election-heavy period, which will culminate in the national elections in March-April 2019. In the next two months, five state elections are scheduled, out of which three are in the crucial northern/Hindi-belt of Rajasthan, Madhya Pradesh, and Chhattisgarh and are currently run by the BJP. The outcome of these state elections can indicate the political direction in the country and also impact the pace and direction of economic reforms.

MF strategy

Though past performance is not an indicator of how a scheme will fare in the future, historical return analysis can throw up interesting points. As a first step, investors can concentrate on mutual fund schemes that have been around for a longer time and avoid schemes that haven’t seen a bear market. This is because a bear market is the real test for a fund manager. Go for funds that have performed well across market cycles and concentrate on funds that outperformed peers when the market was not doing well.

One also has to understand the research capabilities of the fund house, for example, large fund houses like HDFC, ICICI or SBI have established research capabilities but how this can be ascertained for small fund house. In such cases one has to see the pedigree of the promoters.

Top picks

  1. Mirae Asset Emerging Bluechip Fund
  2. HDFC Small Cap Fund
  3. Kotak Emerging Equity fund
  4. Aditya Birla Sunlife Equity Fund