Mutual Funds Should Not Launch Thematic Funds at Market Peaks

Radhika Gupta, MD and CEO, Edelweiss Mutual Fund spoke to TNIE on current equity market situation, closing of SIPs and the right kind of mutual fund portfolio one should have.

- Dipak Mondal @ New Delhi

Excerpt:

With recent market volatility, how are mutual fund distributors coping with SIP closures?

The February data shows SIP growth has been stable despite market conditions. Interestingly, SIP closures are significantly lower in regular plans versus direct plans. Distributors play a crucial advisory role — when markets dip, they counsel investors against impulsive exits. Experienced distributors who have set proper expectations face minimal issues, while newer ones may struggle. The pain is more visible in direct channels where investors lack guidance.

Are thematic funds a necessary evil for the mutual fund industry?

Choice is essential in our diverse market. However, thematic funds must follow two rules: First, avoid ultra-narrow themes (like a hypothetical "cables & wires fund"). Stick to broad, sustainable themes like tech or consumption. Second, never launch a thematic fund at market peaks. At Edelweiss, we launched our IT fund when the sector was out of favor. Our philosophy is "80% dal chawal" (core funds like flexicap) and "20% pickle-chutney" (thematic/sectoral).

Explain your "dal chawal" investing philosophy.