Where can I deposit 10 lakh rupees today? Keep your faith in US technology companies, advises Parag Parikh MF's Rajiv Thakkar.

 

The decline in US technology equities has hurt fund houses, but this CIO is still confident in the industry. He is also optimistic about banks and government-run businesses because of the likelihood of a government withdrawal.

Managing the Parag Parikh Flexi Cap Fund is Rajiv Thakkar (PPFCF). Of all international-oriented mutual fund schemes, it has the greatest allocation to foreign stocks at about Rs 5,000 crore, or 25 to 30 percent of its corpus. Only one fund's corpus, the Motilal Oswal Nasdaq Fund, meets the PPFCF's international allocation, although that fund is specifically international.

PPFCF, on the other hand, is a diversified equity fund that holds at least 65% of its assets in Indian stocks. The fund institution has kept its promise to only have one diversified equities fund that handles everything, rather than launching numerous schemes. However, the year 2022 has put its tenets to the test.

US information technology stock prices plummeted that year. In turn, PPFCF's net asset value decreased.

The restrictions on how much money fund houses can invest abroad are also scheduled to expire in early 2022. What was once thought to be a brief phase has now developed into a 12-month standoff.

These limitations have still not been raised by the Reserve Bank of India. As a result, Indian-based fund companies are unable to make new international investments. They are limited to reinvesting the proceeds from the sale of shares made abroad. Due to the increased popularity of foreign investments as a component of an investor's asset allocation, mutual funds now face fierce competition.

Thakkar, the PPFAS Asset Management chief investment officer, is looking ahead nevertheless. He discusses the reasons why the US tech sector still appears to be in good shape in an interview with Moneycontrol. And he has some wise suggestions for where you ought to put your money right now.

D (PPFCF) (PPFCF). Of all international-oriented mutual fund schemes, it has the greatest allocation to foreign stocks at about Rs 5,000 crore, or 25 to 30 percent of its corpus. Only one fund's corpus, the Motilal Oswal Nasdaq Fund, meets the PPFCF's international allocation, although that fund is specifically international.

PPFCF, on the other hand, is a diversified equity fund that holds at least 65% of its assets in Indian stocks. The fund institution has kept its promise to only have one diversified equities fund that handles everything, rather than launching numerous schemes. However, the year 2022 has put its tenets to the test.

US information technology stock prices plummeted that year. In turn, PPFCF's net asset value decreased.

The restrictions on how much money fund houses can invest abroad are also scheduled to expire in early 2022. What was once thought to be a brief phase has now developed into a 12-month standoff. These limitations have still not been raised by the Reserve Bank of India. As a result, Indian-based fund companies are unable to make new international investments. They are limited to reinvesting the proceeds from the sale of shares made abroad. Due to the increased popularity of foreign investments as a component of an investor's asset allocation, mutual funds now face fierce competition.

Thakkar, the PPFAS Asset Management chief investment officer, is looking ahead nevertheless. He discusses the reasons why the US tech sector still appears to be in good shape in an interview with Moneycontrol. And he has some wise suggestions for where you ought to put your money right now.

The Parag Parikh Flexi Cap Fund generated fantastic gains in 2020 (32% returns) and 2021 (46% returns), but a terrible 2022. It had a -7 percent return compared to the Nifty 50's gain of 6 percent (Total Return Index). as well as 4.3% of the Nifty 500 (Total Return Index). Many investors put money into your fund in 2022 based on prior success. Are you bothered by it?

A six-month or a 12-month period arrives and goes. Over the course of these five years, even Covid would have come and gone. It is true that US technology equities, in which the Parag Parikh Flexi Cap Fund (PPFCF) invests, have declined significantly from their 2022 highs. Don't focus solely on 2022, though. View the events of 2020 and 2021. The largest winners from Kovid were the tech industries.

We started doing more of our shopping online, watching more streaming content, and consuming advertising on digital platforms. Tech investments increased. People began communicating over Zoom, cloud computing took off, and so on. As a result, the stock markets saw an increase in these technological stocks.

He will forfeit a chunk of that revenue in 2022 as business picks back up and more people visit the offices. This is not unusual over a period of two to three years.

Extreme pessimism put pressure on some stocks to sell. In fact, some stocks have already doubled from their November or December 2022 lows, and it's only the first month of 2023.

Are there any lessons that Parag Parikh Mutual Fund can learn from this? maybe to branch out from IT companies? perhaps look beyond America?

Let me ask you this: Is Disney a traditional corporation or a technology company? Disney now runs the Netflix-rivaling movie streaming service Disney+.

Is Netflix an entertainment or technology company? Is Amazon a retailer or a technology company?

Is Walmart a tech corporation or a traditional brick-and-mortar retailer? Walmart operates actual stores. But it also owns Walmart.com and Flipkart. In actuality, software is consuming everything. Every business is a technology company, after all. PayTM introduces UPI locally. But HDFC Bank and Kotak Bank also do. Is Kotak Bank a banking or technology company? Is Paytm a financial or technology company?

The boundaries are rather hazy.

We have invested in four or five businesses abroad, and they are all very distinct from one another. While Amazon is primarily a retailer with a strong cloud computing division, Meta Platforms is a social networking corporation that relies on digital advertising.

Microsoft focuses more on operating systems and business information technologies. I believe that no business today can run effectively without a technology plan. Additionally, the line separating technology from non-technology is highly artificial. Zee, Sony, and Disney Hotstar+ are the rivals if you buy in Netflix. Although Zee TV has a Zee5 mobile app where it offers content and entertainment, it was and is still regarded as a traditional cable television provider. Netflix does not exist in our country.

The environment has altered for many technological companies now that Covid is practically gone and employees have gone back to work. Has your plan changed in any way? What types of multinational corporations are you interested in investing in going forward?

Many were motivated to adopt technology by Covid. Now it's obvious that part of that edge was reversed when things opened up. Like after the lockout ends and physical stores reopen, e-commerce will suffer. Now, some of that online spending will return to real stores (store).

However, there are numerous areas where the market size is larger now than it was before Covid. Let's assume something had an X prior to Covid, and after Covid, it had a 2 prior to Covid. We haven't returned to X since the situation opened up; instead, we're likely 1.5X now. You're claiming that humans have adapted technology in some way.

The days when computer businesses only chased growth and revenue without paying attention to cash flows and profits are long gone as a result of the financial crisis.

In fact, several firms have been so badly damaged that they might never fully recover. At Parag Parikh, we have always made investments in mature businesses, which may be assessed based on their annual revenue, free cash flow, and other fundamentals.

What recommendations would you make to someone looking to invest overseas while the mutual fund limits are still in place Should we try investing directly in foreign stocks under the Liberalized Remittance Scheme (LRS) of $2,50,000 per year instead of waiting for the mutual fund limit to be increased?

Operations-wise, things have gotten a little challenging. Budget 2023 was similarly ineffective. For money sent abroad, a 20% TCS (Tax Collected at Source) was imposed. In order to invest abroad, you must first pay 20% of the investment as tax. Only after you submit your tax return will you be reimbursed for that money. Although this is not an expense, it wastefully restricts your money.

But absolutely, foreign investment is still worthwhile. Country-specific dangers can be decreased. Just that carrying it out has grown a little more challenging.

Can one still purchase equities directly on international exchanges while waiting for the mutual fund limit to be lifted?

You can, indeed. But bear in mind a few crucial points.

Remember the foreign exchange (FX) rate that banks are offering. Discuss the FX rate. Unfavorable conversion rates might occasionally take away a significant amount of profit.

Know the tax regulations, Indian laws, and the rules of the nation you are investing in. Recognize the country's inheritance tax regulations before making an investment. For instance, the inheritance tax may increase to 40% if one invests in the US and the amount is fair. Therefore, if a person invests $1 million and passes away, their heir may be required to pay $400,000 in inheritance tax and receive just 60% of the original investment.

Look at these details before you jump to buy shares and ETFs right away. If you invest through a mutual fund scheme with Indian headquarters that makes international investments, none of these characteristics are relevant.

Which investments should I make today if I have Rs. 10 lakh? Which industries appeal to you the most?


Banking, mostly in the private sector, appears to be doing okay. Bank balance sheets now show that non-performing assets (NPA) problems are a thing of the past.

Look at a few of the public companies where the government is attempting to sell its remaining shares. Given that governance has been a major point of contention in the public sector, there may be some quality difficulties. However, the government has made its voice heard through the sale of Air India.

The government has recently started selling non-core assets from numerous public sector businesses. In many of them, he has welcomed expressions of interest. It will be fascinating to observe if any of this is privatised.

The state of IT services has suffered. They have a respectable level of corporate governance. Yes, there are still some short-term difficulties with the demand from the US and other nations. But if you have the patience, long-term investors will get paid.

As a bull on financial services firms, you previously were. Are you still fond of them?

Yes, we do own some fee-based businesses involved in financializing savings but not in the lending sector.

We have a power exchange, a commodity exchange, and a depository. We continue to have a stake in that area.

Do we need to make a fixed income investment right away? If so, by how much?


Today, fixed income seems exciting. Right now, the yield curve is flat. At present, leading banks like State Bank of India and HDFC Bank provide one-year certificates of deposit at a yield of about 7.65% annually. Even if you choose long-term securities, the returns will be essentially the same.


Therefore, there is no reason to purchase long-term debt instruments at this time. The returns are the same whether you buy debt instruments with a one- or two-year maturity. I would advise a 70:30 equity:debt asset allocation for the majority of investors.