Investors have to be cautious about small- and mid-cap stocks as Indian equities trade around peak valuations and benchmark indices hover near record highs, Rajeev Thakkar, Chief Investment Officer, PPFAS Asset Management Pvt., told BloombergQuint. The large caps are not as expensive, he said.
Mutual funds diversify risk by investing in multiple stocks. The ideal number of stocks an actively managed fund portfolio should have is 20-25, as it allows best ideas to contribute to performance, said Neil Parag Parikh, chairman, PPFAS Mutual Fund.
The single-scheme asset manager runs the Parag Parikh Long Term Value Fund (PPFAS), which has a 30 percent exposure to global stocks.
Having an exposure to global stocks reduces portfolio risk, so we are not taking 100 percent country risk on India.Neil Parag Parikh, Chairman, PPFAS Mutual Fund
While banking and financial services stocks comprise 26 percent of its portfolio, the fund prefers private banks, said Thakkar. State-owned banks are not run as profit-making enterprises and interest of shareholders is not their primary aim, he said.
Thakkar said despite regulatory issues, opportunities for Indian pharmaceutical companies remain. PPFAS fund bought stocks like Dr. Reddy's Laboratories Ltd. and Ipca Laboratories Ltd. after the U.S. Food and Drug Administration issued notices to the two companies.
The asset manager also plans to launch a tax-saving equity-linked savings scheme, and maybe a liquid scheme as well.
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