All You Need To Know About The Underperformance Of PPFAS Flexi Cap Fund | CA Rachana Ranade

laughs calm down please calm down please come down Adventure excitement U.S stock market attractions [Laughter] Hey folks!!! CA Rachana Ranade here and I welcome you all to a very important video which is about Parag Parikh Flexi Cap Fund, you might be wondering as to why am I doing a video on this specific mutual fund? There are two major reasons for the same the very first one is that we had ran a poll to understand how many of you all hold this mutual fund and have a look at the answers having a look at this I thought I should be trying to make a video and try and understand about the performance of this mutual fund which is maybe bothering you all a lot!! Haven't you seen the performance? Have a look at this oh the under performance can be very clearly seen. Now with this I'm sure you have many more questions in your mind. The very first one is why are there negative returns? what is the effect of restrictions on foreign investments? and what should investors do now? To get answers to all of these questions keep on watching the video till the end. Now to understand why did this mutual fund give negative returns? We have to first understand what is the portfolio allocation of this fund for that have a look at this pie chart you will clearly see that 32.2 percent of the total portfolio allocation was only to the I.T sector now out of this 29.4 percent education was there to the I.T companies but listed in USA something like Alphabet, Amazon Microsoft, Meta. Now understand how much was the portfolio allocation to Meta specifically? It was almost six percent to understand whether it is because of this allocation that the mutual fund is giving negative returns or not for that have a look at these charts. First you can see that Nifty IT index was down by almost 32 percent in first half of the year. You can also see that NASDAQ 100 is down by almost 35 percent in a single year and have a look at meta 62.6 percent downfall in just one year. Now if you have seen it I mean if you have seen all these charts carefully do I really need to tell you that is this the reason for the under performance? Answer is obviously Yes, but has this happened for the very first time? For that have a look at this chart. You can very clearly see that in 2014 2016 and 2017 see the blue bar graph represents Parag Parekh flexi cap funds and you can see that especially in 16 and 17 it has not only underperformed the other funds in the category but it has also underperformed the benchmark but in 2019-2020 and 2021 where I think majority of them invested in this mutual fund it gave positive returns but then 2022 was the year again where it gave under performance and not only an underperformance but also negative returns but then the big question in everyone's mind is that was the fund manager just watching and having a look at what is happening with all the entire IT sector? That's not the case he was definitely active during that time as well. Have a look at this chart so that you can understand that the IT allocation as compared to 2021 versus 2022 you can see that 10 percent is the down fall in the IT allocation versus they have increased the allocation in the finance space by almost 8.2 percent, now just for you to understand why finance might have been a preferred sector sector allocation you have to watch out this video as well when I've explained in detail as to why finance as a sector is becoming kind of favorite of a lot of mutual fund managers, you will have to watch that video to understand this entire thing better. But I hope the main question as to why negative returns has been answered properly. Now let's go on to the second question which is about what is the effect of restriction on foreign investments? If you've watched this video you already know what I'm talking about but just in case if you have not watched this video let me try and explain to you in just one sentence which says that SEBI has banned mutual funds on investing in foreign equity okay now you might be having this question that is this restriction forever? The answer is No, there will I mean of course the government said he basically is going to lift this restriction but to when no one knows that, now with negative returns and also with restrictions of investing in foreign equities there are these investors who are complaining like.... and all that is now I mean these are the various questions that are bothering these investors so the very first thing that is bothering them is that is this under performance what has happened right now is it because of the restrictions that SEBI has put I personally feel answer is partially yes because all these U.S stocks that I refer to right now something like Meta or Alphabet or Microsoft majority of these tanked by almost 30 to 40 percent. Now had mutual funds been allowed to invest fresh money in U.S equities they would have gotten an opportunity to average these costs at lower levels but because of the restrictions they had no choice but to just wait and watch. Now the second point which investors so for that let's try and understand what was the strategy or the thought process of the fund manager while selecting various talks. Have a look at this you can see that the fund manager filters the stocks based on great promoters, great management, great business which has high return on equity and you can see a lot more important points. Now if you have a look at the policy documents even today you will see that the basic policy still remains the same okay so all in all I can say that overall fund stock selection strategy has not changed right, but then one last point which still can bother your mind is that if this overseas limit is never increased then what? If you ask me I think this is a hypothetical question ideally the limit will be increased one day or the other okay but just in case if it does not increase then what we have to try and compare this with some other mutual fund which is again owned by the same fund house Parag Parekh fund house. Have they delivered good returns or not and have they outperformed the benchmark or not? For that have a look at this chart you can clearly see that in the last one year Parag Parekh Tax Saver Fund has given a return of 12.76 percent versus The benchmark has given 10.2 percent and additional benchmark has also given 11.93 percent so with this chart you can understand that this Tax Saver Fund which is again of Parag Parekh that has not only outperformed the Benchmark but it has also outperformed the additional benchmark also. Even if I talk about their Chief Investment Officer Mr. Rajiv Thakkar, he has been working as an equity manager for the last 20 years and in one of the interviews he had said that okay even if I have a very big career recently only he has started investing in U.S equities so his hold over investing in Indian stock markets is also very good. I hope this answers all of your questions about the restrictions and about the underperformance. And on to the final question as to what an investor should do about this fund but before I give you my answer let's wrap up whatever we have discussed in now, number one was there an underperformance in this mutual fund in the last one year? Answer is obviously Yes. Number two are there still I mean whatever the restrictions that SEBI had put are they still in force? Answer is again Yes. Is there still an uncertainty as to when this ban will be taken off? Answer is again Yes and number four as to if I were to discuss about the proven performance of some other mutual fund of the same fund house, if you remember Parag Parekh Tax Saver fund is there a proven performance? Answer is again Yes. Now with this should you stay invested in the mutual fund or should you quit this mutual fund for that let us understand one or two more points. Parag Parekh Flexi Cap Fund is one of the flagship mutual funds of this fund house and the fund managers also have a skin in the game what do I mean by that? They've invested their personal money into this mutual fund to the tune of 308.86 crores and even if you have look at this image you can see that the maximum money is invested in this specific mutual fund right. Even if you have a look at this image this image is of the fact sheet in this you can see that red bulla red circle which says that this scheme is suitable for investors who can remain invested for minimum five years. Now if you had invested in this mutual fund with a thought process that I need a money in only one year this will give me fantastic returns I will draw the money and use it for my goal then you will be definitely complaining and then you are left with no choice but to book losses or whatever is the minimal gain and get out of this because if your goal is more to mature in one year which is maybe right now you'll have to book losses but had you read this and had you invested for a long-term goal say five years or more I think there is no need to worry because it is said that class is permanent and form is temporary right so this might be something like a temporary jerk that we are seeing in this mutual fund, no need to worry about this but if you want to learn in a very systematic manner as to how to choose mutual funds which one suits you you should check out my course of Magic of mutual funds which will help you to plan your Investments better so all in all to wrap up I feel that you must understand that this has not underperformed to a large number of years, still not convinced !!! have a look at this chart then here you can very clearly see that fund has generated a CAGR of 15.52 percent in the last five years as compared to flexi cap category average of just 9.05% and 11.08 by SNP BSC 500. So I hope by now you are totally convinced and if you are a long-term investor no need to worry. One more important disclaimer hashtag this is not a sponsored video because many of you said that we are already invested in this mutual fund that is the only reason why I thought that I should make a video on this. I hope all the queries about Parag Parekh Flexi Cap Fund have been answered by the end of this video. If you like the analysis don't forget to smash the like button, don't forget to share this video with your friends and if you want to know more about top two stocks on my radar for this year click here and if you want to know more about SEBI's ban on foreign investments you can click here till then take care, Jai Hind and bye, bye.

Channel: CA Rachana Phadke Ranade

Views: 791,537

Keywords: CA Rachana Ranade, stock market basics, basics of share market, share market basics, Stock market, money, share market, fundamental analysis, CA Rachana, Parag Parikh Flexi Cap Fund, PPFAS Mutual Fund, SIP, direct growth, Invest or Exist, Best Flexi Cap Fund, flexi cap, PPFAS Mutual Fund Review, buy or sell, Rajeev Thakkar, Raunak Onkar, Foreign Investors, Foreign investments, excitement, us stock market, returns, negative returns, Kangana Ranaut, Queen movie, amazon, meta, IT

Id: -jFjhMwMQZI

Length: 11min 27sec (687 seconds)

Published: Sat Jan 14 2023