DSP Mutual Fund, a prominent player in the financial landscape, has released its annual note, drawing parallels between the Tour de France and crafting a thoughtful investment portfolio strategy for 2024. The analogy emphasizes the importance of diversity and a well-rounded approach in building a winning investment portfolio, mirroring the dynamics of assembling a ‘dream team’ for the iconic cycling event.
Investors are urged to diversify their portfolios across market cap segments, analogous to having different riders for various terrains in the Tour de France. The strategy aims to maintain balance during different market conditions, acknowledging that, like a cycling race through challenging mountains, the value of investments can fluctuate.
In India, DSP Mutual Fund recognizes the robust domestic opportunities that shape its optimistic long-term perspective on the economy. Despite the overall resilience in high-frequency growth data linked to domestic demand, concerns have surfaced regarding the vulnerability of rural demand and uncertainties surrounding private capital expenditure. The Indian mid and small-cap segments witnessed significant growth in CY23, prompting questions about the factors driving this ascent and the future prospects for these segments.
Reflecting on insights from 2023, DSP notes that despite increased volatility, mid and small-cap stocks have emerged as long-term winners. Over five years (CAGR), mid-caps returned ~21%, small caps ~18%, and large caps ~14%, highlighting their resilience and enduring success. A 5 and 7 year rolling returns analysis for Nifty Midcap 150 TRI Index and S&P BSE 250 Smallcap TRI Index provides interesting insights, emphasizing the stability of midcaps over the long term.
In the dynamic landscape of 2023, DSP acknowledges the rise of both good and not-so-good quality mid and small-cap stocks. The fund’s preference leans towards quality midcaps as they offer a more effective approach to wealth creation with reduced volatility. Given the current scenario with elevated multiples, sticking to quality companies and understanding business cycles and valuations becomes crucial for future success.
DSP’s cautious approach towards Public Sector Undertakings (PSU) has shifted with improved operating performance. The BSE PSU index has posted a CAGR of 28% over five years, outpacing the Nifty-50 index. While DSP has increased exposure to PSU companies, the selection criteria remain stringent, focusing on companies that meet fundamental parameters.
Looking ahead to India’s future in 2024 and beyond, DSP identifies key trends poised to influence the nation’s trajectory. The young age population is expected to be a key demand driver, with Gen Z and Gen Alpha cohorts influencing consumer behavior. The continuous increase in the working-age population and growing income levels suggest stability and sustained growth.
Investment expenditure is on the rise, backed by reforms, emphasis on manufacturing, energy transition, and supply chain diversification. The surge in domestic manufacturing, propelled by the Production-Linked Incentive (PLI) scheme, signals a favorable shift in the current account and potentially less volatile currency.
Vinit Sambre, Head – Equities, DSP Mutual Fund, emphasizes the fund’s commitment to delivering consistent, risk-adjusted long-term returns. He states, “Our role, like a team in the Tour de France, has varied talent to achieve the ultimate objective – deliver consistent, risk-adjusted long-term returns for our unitholders. Our goal remains – improving financial outcomes for our 3.5 MN existing investors while also welcoming new ones who can benefit from our simple and disciplined approach to achieving their financial goals.”
As investors navigate a landscape marked by global uncertainties, shifting economic dynamics, and rich valuations, DSP Mutual Fund’s insights from the Tour de France offer a strategic roadmap for those seeking consistent, risk-adjusted returns in the ever-evolving world of investments.