The much-awaited initial public offerings (IPOs) of Jio Platforms and NSE, if launched within a short span, could temporarily weigh on the secondary market as liquidity gets diverted towards the large issues, according to Rishi Kohli, chief investment officer at Jio BlackRock Mutual Fund.
“Traditionally, whenever large issues have come, markets have usually remained subdued for a few weeks before and after,” Kohli said.
Mutual funds have emerged as key institutional participants in IPOs in recent years. Kohli, however, does not expect large public issues to materially affect fund houses, as their anchor investments typically account for only a small proportion of the assets of large asset management companies (AMCs) and individual schemes.
On the sustained retail participation in mutual funds, particularly in mid- and small-cap schemes, Kohli said even a reversal in these segments is unlikely to significantly dent the systematic investment plan (SIP) book. Investor behaviour has changed considerably in recent years, including in smaller cities, he said. During market corrections, SIP flows could see flat or marginally negative growth, as witnessed in recent downturns, rather than a sharp fall.
On market valuations, Kohli remains selective, pointing to wide dispersion in valuations, earnings growth and price performance across sectors and stocks. Companies in sectors with strong growth prospects could continue to perform well, while pockets with weaker fundamentals warrant caution.
“This is a stock picker’s market, so good stocks or good investment processes can make alpha,” he said.
Large-cap valuations are below their historical averages but are not cheap, leaving room for selective opportunities, according to Kohli. Mid- and small-cap valuations, meanwhile, appear reasonable when adjusted for their growth prospects, he said.
Jio BlackRock Mutual Fund is currently overweight on pharma, banks, materials and information technology, though Kohli cautioned that sector positioning could change quickly as markets have become more tactical.
“The buy-and-hold approach may work for small caps where there is a long-term growth story, but in large and mid caps, tactical changes are required as alpha goes away very fast,” he said.
On the fund house’s growth plans, Kohli said Jio BlackRock plans to launch a balanced advantage fund this week, followed by two factor-based index funds in the near future. The fund house is also prioritising growth in active schemes and its GIFT City business.