Aashish Somaiyaa, Executive Director and CEO of WhiteOak Capital AMC, manages an equity fund with assets of Rs 27,000 crore. Of this, Rs 17,000 crore has been allocated to mutual funds, while Rs 10,000 crore is invested through alternative investment funds and portfolio management service (PMS) schemes. Somaiyaa speaks to BT about how those who stay invested reap the benefits over time. Edited excerpts: After a six-month correction in Nifty, Bank Nifty, and other indices, do you believe the worst is behind us? I would not say the worst is behind us just yet. Recently, we have seen another wave of headwinds, particularly due to significant correction in the US markets. Factors like multiple GDP downgrades in the US, uncertainty around (Donald) Trump’s actions, and growing concerns about investments in AI (artificial intelligence), though not termed a bubble, are increasingly being scrutinised. Google, Amazon, and Microsoft’s results have also raised questions about AI’s impact. The recent corrections were driven by broader emerging market trends, a strong dollar, and global shifts. Now, with the US also seeing a downturn, another phase of correction is unfolding. While we might be in the final leg, whether it lasts 15 days or a month, is uncertain. Markets may still see another 5-7% downside before stability returns. Investors have seen significant losses due to valuation erosion and falling stock prices. What are your key takeaways from this downturn, and what advice do you have for investors? Over the past five years, with digitisation accelerating post-demonetisation and Covid, equity investing has gained tremendous traction. However, investors enter markets in different ways—some via mutual funds, others through direct stock picking or F&O (futures and options) trading. If we analyse the correction, Nifty and Nifty 500 have declined by 15-18%, mid-, and small-cap indices by 20-25%, and mutual funds by 15-20%. However, individual stock portfolios have seen significantly higher declines, often double that of mutual fund NAVs (net asset values). The reason? Direct investors tend to buy into trending stocks—PSUs, railways, defence, and infrastructure without proper portfolio construction principles. Investing is not just stock picking; it requires constructing a portfolio that can weather market cycles. Investors should recognise this distinction. How have you been deploying fresh inflows for mutual fund investors? Is there a different approach for PMS (portfolio management services) and AIF (alternative investment fund) investors? Intelligence in markets is relative—often, those who stay invested reap the benefits over time. Our approach has been measured. Since mid-2023, we have advised investors to stagger their investments, rather than deploying aggressively. Even now, we recommend a three-month staggered approach. Additionally, we encourage a mix of asset classes—equity, debt, and gold—rather than going all-in on equities. Hybrid funds, like balanced advantage funds, help investors navigate volatility. Another key message is avoiding excessive averaging in stocks that have already delivered high returns in past cycles, such as PSU, defence, and infrastructure. History shows that sectors that over perform in one cycle often underperform in the next. Micro analysing FII outflows is also counterproductive. Markets correct 15-20% regularly, but they also hit new highs every few years. India has been an outperformer compared to other emerging markets. Investors should remain disciplined rather than reacting to short-term global market movements. Given the correction, which sectors have been resilient, and where have you allocated fresh funds? The previous bull market saw cyclical, policy-driven sectors—PSUs, defence, railways, and infrastructure—outperforming. Conversely, financials, private sector banks, NBFCs, IT, healthcare, and chemicals underperformed. During this downturn, the over performing sectors have seen the sharpest corrections (30-40%), while financials, for instance, have fallen much less (single digits). If markets recover, these resilient private sector banks, NBFCs, capital market entities, IT, and healthcare—are likely to lead the recovery. We have increased allocations in these areas. There is a consensus that large caps will outperform mid and small caps over the next six-eight months due to valuation concerns. In your preferred sectors, are you focusing on large caps, or are you looking for growth across market caps? In our flexi-cap and multi-cap funds, the allocation follows a descending order: large-cap first (60-65%), followed by small-cap (25%), and then mid-cap (10-15%). While financials, IT, and healthcare lean toward large caps, certain segments like white goods, discretionary consumption, and manufacturing provide opportunities in the small- and mid-cap space. Despite volatility, small caps remain a fertile ground for stock picking and alpha generation, given their heterogeneity and institutional underrepresentation. @shail_bhatnagar
