AI Stocks: Right Time To Invest? | The Mutual Fund Show | NDTV Profit
Is now the perfect time to jump on the AI bandwagon and invest in AI stocks?
PPFAS Mutual Fund’s Raunak Onkar and Germinate Investor Services’ Santosh Joseph share their insights, in a conversation with Tamanna Inamdar on ‘The Mutual Fund Show’.
PPFAS Mutual Fund’s Raunak Onkar and Germinate Investor Services’ Santosh Joseph share their insights, in a conversation with Tamanna Inamdar on ‘The Mutual Fund Show’.
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TVTranscript
00:00 [MUSIC PLAYING]
00:03 Welcome.
00:09 You're watching the Mutual Fund Show on NDTV Profit.
00:12 I'm Tamannaah Inamdar.
00:13 This is the show which helps you make the right decisions
00:16 on your mutual fund investments.
00:18 Well, today we're talking about that one stock, that one
00:21 sector, and that one focus that the whole world is talking
00:25 about, and that's Nvidia.
00:27 Now, if you're sitting and wondering, well,
00:30 it was good luck, or the lucky investors on Wall Street
00:35 who can invest in Nvidia, that's not really the case.
00:38 There are quite a few mutual funds
00:41 that have exposure to Nvidia and other AI stocks,
00:45 to FANG stocks as well, in India, at least two directly
00:50 and a clutch of them through passive investments.
00:53 We're going to tell you a bit about that on the Mutual Fund
00:56 Show today.
00:57 We're also going to tell you whether this
00:59 is the right time to hop on to that AI bandwagon.
01:03 Does it make sense?
01:04 How do you make that decision?
01:06 So let's speak now with Ronak Onkar.
01:08 He's fund manager and head of research
01:10 at Parag Parikh Mutual Fund.
01:12 I'm also speaking with Santos Joseph.
01:14 He's founder of Germinate Investor Services
01:18 and is going to be our advisor for the day.
01:20 Welcome to both of you.
01:22 Ronak, let me begin with you.
01:23 And the reason we were keen to speak with you
01:25 is because Parag Parikh Mutual Fund is one of the early ones
01:30 that have had an exposure to FANG stocks that have given
01:34 Indian investors that opportunity.
01:36 Let's start by getting a sense of how well that has paid off
01:41 for Indian investors, why Parag Parikh first
01:44 decided to go into funds like this,
01:46 and right now, what is the kind of interest
01:49 you're seeing for funds which have exposure to tech
01:53 stocks on Wall Street, especially to do with AI?
01:57 Thank you for inviting me.
01:58 So we only have one scheme, the Parag Parikh FlexiCap scheme,
02:02 which is the one that invests in international stocks.
02:05 And in that scheme, we have exposure
02:07 to companies like Alphabet, which
02:09 is the parent company of Google, Microsoft, Amazon,
02:12 and also Meta, which used to be called Facebook earlier.
02:15 So these companies were invested in our fund a while ago,
02:19 essentially because they don't have equivalent companies
02:22 in the Indian listed market.
02:24 So if you wanted to find an equivalent of a Google-like
02:27 company in India, we don't have an option, number one,
02:30 even in the unlisted space.
02:31 In the listed space, we don't have equivalent technology
02:34 companies here.
02:35 Same applies to companies like Microsoft or e-commerce
02:38 retailer like Amazon or even a social networking
02:41 company like Meta.
02:43 So we wanted to invest and get exposure to these companies
02:45 and also diversify from having a country-specific exposure
02:49 to only Indian stocks.
02:50 So at the moment, we have 15% of our portfolio
02:53 invested in the global stocks that we own.
02:56 And the idea was to geographically diversify
02:58 and also participate in a unique business opportunity, which
03:01 also is a good business to participate in.
03:05 Can you give us a sense--
03:06 I know, Ronek, you don't do perhaps talks specifically
03:10 about any stock.
03:11 But can you give us a sense of how some of these--
03:14 or this fund has performed over a period of time?
03:17 The fund has done reasonably well.
03:19 And it's also on the back of the domestic stocks.
03:21 So it's not just the international holdings
03:23 that have helped us do well.
03:25 If you see the history of the past 10-plus years of Plexiglas
03:28 fund, we have had international investments
03:30 right since inception.
03:32 So sometimes when the international stocks would
03:34 do well, the domestics will not do well.
03:36 Sometimes domestic will do well, international will not do well.
03:39 Sometimes both will do well or worse at the same time.
03:41 So on an average, the performance
03:43 has been the performance of the NAV
03:44 that has been in the fund over the past 10-plus years
03:47 that the scheme has been operational.
03:49 And I don't mind talking about the specific stocks
03:51 we own because the businesses we have discussed
03:53 in public in the past as well.
03:55 These are very unique businesses, like I said.
03:57 And they have different buckets of exposure
03:59 to the segment that you are describing,
04:01 the AI segment you are describing.
04:02 So we can discuss that further.
04:03 OK, great, great.
04:04 No, so then let's do that.
04:05 I was under the impression you might not
04:07 want to because, frankly, all anyone wants to know about
04:09 is Nvidia right now.
04:11 And is this a way to get exposure to Nvidia?
04:14 Do you think it's too late?
04:17 As a fund manager, have people missed the bus?
04:22 Or is there more to come, considering
04:23 that their revenues have quadrupled
04:27 and they have very strong projections ahead?
04:30 So since we don't own Nvidia, I won't be able to directly give
04:33 you an answer to that.
04:34 But what I can tell you is, and your audience,
04:35 is the idea to understand the AI market.
04:37 I hope you have some time for that.
04:39 Number one is there are three layers to it.
04:41 One is the infrastructure or the hardware layer
04:43 where Nvidia rests.
04:44 And even the companies like Google or even AWS or Microsoft,
04:50 they provide cloud computing infrastructure,
04:52 which is required for running these AI businesses.
04:55 The second layer, which is on top of that,
04:57 is the actual models, which we hear from OpenAI or Google's
05:00 Gemini or even AWS's Citon.
05:03 So these kind of models, which require a lot of computing
05:06 resources, they are built on top of the infrastructure layer.
05:09 And the third layer, which is the layer which
05:11 we are exposed to as users, is the application layer.
05:14 So it can be an enterprise software that we are using
05:17 or even a personal device or software which
05:19 has AI components built into it, like a recommendation
05:22 engine or a customer service support that we are seeing.
05:25 So all of these things are on the application layer.
05:27 At the moment, what we are seeing
05:28 is there's a huge buildup in the bottom of the pyramid of this
05:32 where infrastructure is considered.
05:33 So you can see CapEx from all these cloud players going
05:36 and benefiting companies like Nvidia,
05:38 who have the specific hardware that they can sell for scaling
05:41 up the infrastructure capacity.
05:43 On top of that, when companies like OpenAI or even Google
05:47 invest in creating their own models,
05:49 they will have to consume this infrastructure on their own.
05:52 And right now, you will only see a few plans which
05:54 they're offering to customers to buy,
05:57 where they can expose them to the APIs
05:59 of the underlying models.
06:00 And these APIs essentially become the usable part
06:03 of the application layer.
06:04 So we have not even seen the application layer grow yet.
06:09 And of course, in any technology,
06:10 we can see the progression going up.
06:11 So right now, we are in the curve
06:13 where we are seeing the hardware and the models driving
06:16 the demand right now, whereas the application layer is being
06:19 built out slowly and steadily.
06:20 So here we are.
06:22 So if you ask about missing the bus,
06:23 it's very hard to say because we don't know how much hardware
06:26 will be required in the future.
06:27 We don't know how much investments will
06:29 be sustained in the future.
06:30 That is something we have to monitor.
06:32 What is your outlook for your fund?
06:35 So companies we are positioned with,
06:36 they have exposure to both the layers, even all three
06:40 layers.
06:40 So we are OK.
06:41 We are diversified across different layers.
06:43 So we are not betting our hopes on only one player doing it.
06:46 All right.
06:47 So that's a good sort of segue to talk
06:50 about the next leg of this.
06:52 And, Santosh, if we come to you on that, of course,
06:54 Ronek, stay on with us.
06:55 The question is, now, how do you make the most of it?
06:58 Is this the approach, a FlexiCAP kind of fund?
07:03 There are some active funds available--
07:05 I think only a couple, really--
07:07 and more passive funds available.
07:10 Is that, in a sense, a good idea to go for?
07:13 And your take on the NVIDIA rush?
07:15 Do you think enough Indian investors would have also
07:18 participated in that?
07:20 Well, the first thing is that, thanks to the sharp move
07:23 that we saw last week, everybody wanted
07:25 to check their portfolios to see,
07:26 do I have NVIDIA in my portfolio?
07:28 And if you actually watch some of the NABs
07:31 where which had the potential to have US equities,
07:34 you did see a couple of schemes which did have NVIDIA,
07:38 whether directly or indirectly, have a 3% to 3.5% blip in the NAB
07:42 just on one day.
07:43 The NAB just shot up about 3% in just one day,
07:47 thanks to the 15% move.
07:49 Now, the way an Indian investor can
07:53 benefit from investing in NVIDIA or Meta or the Microsoft
07:57 business is, number one, in funds
08:00 like which Ronek is running, where it's a domestic Indian
08:03 equity fund, where they use the 35% limit that they have
08:08 to take exposure to equities beyond the domestic market,
08:12 which adds great value to the fund,
08:14 largely depends on the scheme objective
08:15 and also the investor choosing them.
08:17 The second is the fund of funds which
08:20 have exposure to global equity, both diversified as well
08:23 as thematic.
08:24 Now, a classic example here is that Franklin Templeton
08:27 has got a US opportunities fund where one of the top holding
08:31 there is NVIDIA.
08:32 And therefore, you see that NAB is giving you
08:34 the highest return on a three days or a seven day basis.
08:38 Now, you also have a lot of passive funds,
08:40 whether it's the paying funds or even simply put by the NASDAQ
08:44 ETF.
08:45 So I think an investor need not fret or worry
08:48 about missing out number one NVIDIA or any other fund.
08:52 For example, over the last few months and almost a year plus,
08:56 we have a lot of funds coming out of the innovation funds.
08:59 Now, at the core of innovation, there is so much of AI
09:02 and innovation led technologies which
09:05 are abundantly available in the US
09:08 where it's becoming critical part of the portfolio.
09:10 So one, don't worry about missing the bus as far
09:13 as NVIDIA is concerned.
09:14 Number two, it's easier than you think to get access to this.
09:17 And number three, when you are in a good portfolio which
09:19 has got access to these kind of technologies and strategies,
09:23 you will benefit from NVIDIA or the next NVIDIA
09:26 that's going to unfold.
09:28 All right.
09:29 My question is, should we get on to some of these funds
09:34 now?
09:34 Because like you said, the seven-day NAVs are looking
09:37 great, and this question for Santosh.
09:39 And which of these would be the right pick as of this point?
09:45 Whether it is this fund or any fund,
09:47 chasing returns is the wrong way to start by selecting
09:50 the fund to begin with.
09:52 Now, if an investor so desires that his portfolio construct
09:56 requires international equity exposure
09:58 or the client knows what the international equity
10:01 as a perspective can add to his overall portfolio,
10:03 then I don't think time is a constraint.
10:06 You can add it even now.
10:07 But when you add that, you have to be aware of the risk.
10:11 Simply put, the market risk at one--
10:13 like Ronek was just explaining, Indian markets
10:16 perform differently.
10:16 Global markets perform differently.
10:18 Within that, technology performs very differently.
10:22 Over and above that, you also have the currency risk,
10:24 which is at play now and then.
10:26 There is no hard and fast rule that just because of big
10:30 returns you can't add or you should add.
10:32 I think it has to be done more so with a portfolio
10:34 construct in view.
10:36 I don't see a reason why you shouldn't add even now,
10:39 though it's run up so much, as long as your portfolio can fit--
10:43 as long as the fund can fit into your portfolio.
10:46 I asked you this question earlier on,
10:49 but I'm just curious to know, are you recently
10:53 seeing more excitement about your fund with FANG exposure?
10:58 Or if you can give me a sense in the last few weeks,
11:01 maybe since the beginning of the year,
11:02 as this trend has picked up, are you
11:04 seeing more interest coming in?
11:06 The interest has more or less been the same.
11:08 We have mostly long-term investors.
11:10 We have been communicating to them what our strategy is
11:12 and why we are making our picks.
11:14 So most of them are long-term investors
11:15 with SIPs running for a while.
11:17 So it's not a particularly different kind of interest
11:19 that we are seeing today that we haven't seen before.
11:23 So you're seeing the same interest.
11:25 Maybe it's because you don't have Nvidia in your portfolio.
11:28 That could be one of the reasons.
11:30 It's all about Nvidia.
11:32 I know you explained the layers, but frankly, people
11:35 are just seeing that one stock.
11:38 We're going to take a very short break.
11:39 On the other side, we discuss what your options are.
11:42 If you are a new investor, at what stage
11:45 and in which profile should you look at some of these funds?
11:48 And also, we'll be taking your queries.
11:50 This is the section of the show where we take your queries
11:53 that you have sent in to us, those numbers on your screen,
11:56 in case you want to write in to us.
11:57 And Santosh Joseph today is answering them.
12:00 He's founder of Germinate Investor Services.
12:03 Santosh, thank you for staying with us.
12:05 Now, our first query today is from Braj Kishore.
12:08 He is 44.
12:10 And he says, I've invested 5,000 as an SIP in the Axis Blue Chip
12:16 Fund for the last three years.
12:18 The total fund value is 1.5 lakh rupees.
12:21 Since this fund is underperformed,
12:23 I have decided to exit and start SIP in a new fund.
12:28 How should I invest the 1.5 lakh corpus created
12:32 from the previous fund?
12:33 And what large cap fund would you
12:35 suggest to start and set in?
12:37 Is Canara or Robeco Blue Chip Fund a good option?
12:41 So very interesting query there, Santosh.
12:43 I wonder what you think of it.
12:45 Because yes, people would go fund shopping.
12:49 How long should you give a fund that you feel, after a point,
12:51 is not making the mark?
12:55 Yeah, that's one of the most trickiest questions as far
12:57 as staying a patient investor is concerned.
13:01 But let me just address something over here.
13:03 Having been in a good fund like an Axis Blue Chip
13:05 Fund for three years, and especially
13:07 in a good format like an SIP, I think
13:11 you shouldn't have redeemed the fund.
13:12 You should have kept it.
13:13 Now, after having withdrawn the funds,
13:16 going back to another large cap fund
13:18 may not make great sense.
13:20 Because you see the last two or three years,
13:23 the markets did well.
13:24 But large caps have kind of been laggards in performance.
13:28 Now, if you're going to remove money from large cap, which
13:30 you've accumulated through a SIP,
13:31 and go back to a large cap fund, you
13:34 might experience a similar experience all over again.
13:37 So maybe it's better to tweak your investment objective
13:40 a little bit, and possibly start looking
13:42 at a flexi cap or a multi-cap fund,
13:44 where you are predominantly positioned as large cap,
13:47 but you also have a little bit of exposure
13:48 to small cap and mid cap.
13:50 Therefore, you will not experience
13:52 what happened the last two to three years,
13:53 where large caps underperformed, whereas mid cap and small caps
13:56 outperformed the markets.
13:58 Being in a little more homogeneous scheme objective,
14:01 like a multi-cap or a flexi cap, will avoid the lack of patients
14:06 that you just experienced in Axis Blue Chip,
14:08 and therefore give you a better return over a three
14:11 to five year period.
14:12 So if you're considering the Candor Evoco large cap fund,
14:16 I mean, within their stable, I think
14:17 it's better you can look at their multi-cap or flexi cap
14:20 fund.
14:20 I think you will do better for yourself,
14:22 considering you're making this as a lump sum investment.
14:25 Just an overview here, Santhosh, on large cap funds.
14:29 And obviously, there are different parameters
14:32 to check if something is underperformed.
14:34 But in a sense, people are also going
14:37 to look at how small cap and mid cap funds have performed,
14:39 at least in the last year or so.
14:41 And in comparison, large caps are perhaps lagging.
14:44 Do you think that now is the time
14:46 to give some kind of faith or put some kind of faith
14:49 in large cap funds?
14:52 Well, you're right on that.
14:53 When you look at performance, and relative performance
14:55 is the most impactful one.
14:57 So you have large caps, mid cap, and small caps.
14:59 So you have an average smaller mid cap
15:01 deliver in excess of 40% return as far as the last one year
15:04 is concerned, whereas you see large caps underperforming,
15:07 even the index some of them.
15:09 Now in this scenario, it is looking really good
15:13 from a three year perspective that large caps have not
15:16 done well.
15:16 And one could look at a fresh exposure to large caps
15:19 considering that there's a valuation gap in large caps.
15:22 It's also important to note that the rally in smaller mid cap,
15:28 which has been so robust, may not always sustain.
15:31 At some level, the rotation will happen.
15:33 Large caps will come back.
15:34 Mid caps maybe take a backseat.
15:36 So while we feel that because of non-performance of large caps
15:41 as yet so far, there is a value opportunity out there.
15:45 But I think one should also be aware that these things tend
15:49 to rotate.
15:50 And in both cases, in terms of a rotation case,
15:53 and even in terms of performance,
15:55 large caps seem to be a lot more lucrative right now.
15:57 Let me take one more question.
16:02 This is from Mr. Nair, who's 63 years.
16:05 I found this question quite interesting, frankly.
16:07 He says, I'm retired and would like
16:09 to know which is the best hybrid or debt fund
16:11 to get monthly or quarterly income of around 30,000
16:15 to 90,000, so quite a range there.
16:18 And what amount do I need to invest as a lump sum or SIP,
16:22 and for what period?
16:24 Now, this is, I think, a good question
16:27 because it's talking about something which
16:29 gives you a consistent return.
16:31 He also says, I also do options weekly for monthly income
16:34 and have invested approximately 10 and 1/2
16:36 lakhs in the SCSS scheme.
16:39 What would be your advice, Santosh, for Mr. Nair?
16:43 So for Mr. Nair, let's begin from the second half
16:45 of the question.
16:46 You should continue Senior Citizens Aid scheme
16:49 because it's a good scheme for senior citizens.
16:51 And you have a defined yield coming in on a monthly basis
16:55 since the most important aspect of this query
16:57 is that they like the month-on-month income
16:59 to be coming.
17:00 Now, as far as investment into the other fund concerns,
17:03 whether it's a debt fund or a hybrid fund,
17:06 I think today the choice is clearly
17:08 between maybe an equity savings or a slightly conservatively
17:12 managed balance advantage fund, and then
17:14 choose to initiate an SWP to ensure you get that income.
17:20 Now, here, you optimize your taxes
17:22 because both equity savings and balance advantage
17:24 is a category give you equity taxation.
17:26 And when you do SWP, even the withdrawal
17:29 also is optimized for taxes.
17:31 So as far as Mr. Nair is concerned,
17:33 keep the Senior Citizens Aid scheme, let that income come,
17:36 make the rest of the investment into either a BAF,
17:39 conservatively managed, or a good equity savings scheme.
17:45 Ensure that the money is--
17:47 the withdrawal rate or even the amount of money
17:50 that you want to withdraw on a month-on-month basis
17:52 is within that 5% to 6% annualized percentage
17:58 of the overall investment to ensure
17:59 that you let your investments also grow and also
18:02 meet your income requirements on a monthly basis.
18:05 OK.
18:05 So let's-- we have a few minutes left of the show,
18:08 and I want to pack in as many questions as I can.
18:10 So Chinna is our next query, who's 32 years of age.
18:13 Says, for the last one year, I've
18:15 had an SIP of 2,000 rupees each in three funds, the Canada
18:18 Rebeco ELSS Tax Saver Fund, the Mirai Asset ELSS Tax Saver
18:22 Fund, and the Quant ELSS Tax Saver Fund.
18:27 Should I invest in two to three funds from the same category,
18:30 or should I invest in only one fund with good returns?
18:32 Good question, Chinna.
18:34 Three ELSS Tax Saver Funds.
18:36 Santosh, do you think that makes sense?
18:39 Well, it is a bit much.
18:41 One could have solved the problem,
18:43 but I think I can see where Chinna is going.
18:44 He's going with diversifying within the ELSS category,
18:48 because whether you do one fund, two fund, or three fund,
18:50 the objective of the tax saving category
18:52 is to save taxes and optimize on return.
18:55 But here, I think he's done a bit of a smart thing
18:57 by going in two, three selection.
19:00 Now, also what I see interesting over here
19:02 is these are very divergent styles from Canada Rebeco
19:05 to Mirai to Quant.
19:07 All the three are quite broadly placed in the spectrum.
19:10 So I think, Chinna, you've done a good job for yourself,
19:12 though you could have just done with one or maybe two schemes.
19:15 You've diversified well.
19:16 So as your portfolio grows, it's nice to keep it diversified.
19:20 And this learning will be valuable for you.
19:23 OK.
19:25 I think there was a bit of self-awareness,
19:27 as far as Chinna is concerned, because they also
19:29 asked, should I invest in only one fund with good returns?
19:33 Just an overview on tax saver schemes.
19:37 Do they make sense?
19:38 Are mutual funds the right way to look at tax saving?
19:46 I think for this, the answer is an absolute resounding yes.
19:50 Now, the first thing is first you
19:51 have to keep in mind that you have to use the old tax
19:53 regime for this so that you can get the benefit of Section 80C.
19:56 There are very simple points that help us figure out
20:00 why this is the best.
20:01 Number one, this has got the lowest amount of lock-in,
20:04 which is only three years.
20:05 You can do an SIP over here.
20:07 You can diversify like how Chinna
20:09 has done into multiple schemes, because if you think
20:11 the styles are different.
20:12 And number four, when you compare all the available tax
20:15 saving scheme on a 5, 10, 15, 20 year basis,
20:19 again, a resounding answer that ELSS schemes have just
20:22 outperformed every other avenue left.
20:25 In fact, ELSS schemes are actually
20:26 on par with some of the best performing funds
20:28 in across categories, even in mutual funds.
20:31 So as far as Chinna's thought process is,
20:35 I think he's done a good job for both saving tax
20:37 and for also optimizing growth of his portfolio.
20:41 All right.
20:42 So it is a good idea in certain cases.
20:45 Thank you so much, Santosh, for joining us today.
20:48 Do send in your queries as well to us on the Mutual Fund Show.
20:52 Those numbers, the WhatsApp numbers
20:54 on the bottom of your screen, the more detail
20:55 you can send about yourself will always
20:58 help us get a more detailed answer for you,
21:03 which could help you.
21:04 So please do try and add all of that in your query.
21:08 That's all the time we have today.
21:09 But thank you so much for watching.
21:11 Stay tuned.
21:12 A lot more coming up on the other side on NDTV Profit.
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