Interview with Jaiprakash Toshniwal, Senior Equity Research Analyst and Fund Manager, LIC Mutual Fund

As India progresses towards becoming a USD 5 trillion economy, a favourable demand environment is emerging in the consumer and manufacturing sectors, opines Jaiprakash Toshniwal, Senior Equity Research Analyst and Fund Manager at LIC Mutual Fund Asset Management Ltd.

Could you share your overall investment philosophy, particularly when it comes to managing equity funds? How do you approach the balance between growth and risk in your investment decisions?
Our investment philosophy revolves around emphasising earnings growth and valuation. We assess the trajectory of earnings by making reasonable assumptions informed by both primary and secondary research. Using this estimation as a foundation, we analyse the valuation to ensure prudent investment, avoiding overpayment. Additionally, we employ a funnel approach, filtering out companies with corporate governance issues, limited business scalability, and lower capital efficiency. 

Are there specific sectors or industries that you find particularly promising or challenging in the current market environment, and why?
As India progresses towards becoming a USD 5 trillion economy, a favourable demand environment is emerging in the consumer and manufacturing sectors. The trend of premiumisation is evident in various consumer segments, including luggage, hotels, and durables. Government policy-led initiatives are fostering growth in the manufacturing sector. Beyond these primary sectors, there is a noteworthy momentum in credit growth, which bodes well for the BFSI (Banking, Financial Services, and Insurance) sector. We are positive in these sectors.

When it comes to selecting individual stocks, what key criteria do you prioritise? How does your team research to identify potential investment opportunities in the market?
As a team, we engage with industry experts, stay updated on industry developments and conduct primary research. Additionally, we utilise various screeners within our investible universe to identify potential investment opportunities. Nevertheless, it's important to note that our process is intricate and demands a profound understanding of the sector, as well as a close observation of the economic landscape in which we operate.

Risk management is crucial in fund management. What strategies or tools do you employ to assess and mitigate risks associated with the equity portfolios you manage?
Risk is an inherent aspect of equity investment. We strive to minimise this risk by implementing stringent criteria during the selection process. These criteria include factors such as negative corporate governance, inefficient capital allocation trends and issues related to business scalability. After investing, we maintain regular monitoring of industry and business developments, promptly taking corrective measures if necessary.

In the context of long-term investment, how do you navigate short-term market fluctuations? What advice would you give to investors looking at a more extended investment horizon?
Our primary focus is on the sustained trajectory of earnings growth over the medium to long term. Short-term fluctuations, often influenced by market noise, do occur, but we refrain from taking immediate action unless they have a detrimental impact on our anticipated earnings trajectory. Numerous studies and evidence highlight the advantages of long-term investments in wealth creation and investors should be mindful of these considerations.

What would be your advice for an investor who wants to park Rs 1 lakh in equity mutual funds? Can you highlight any specific themes that you believe will be key drivers of this growth?
Engaging in equity investment requires a thorough understanding of one's risk tolerance, investment objectives, and return expectations. The current industry offers a range of investment categories, spanning from low-risk index funds to high-risk thematic and sector funds. It is advisable to select investments aligning with one's risk appetite and investment horizon. Seeking guidance from a registered investment advisor can assist in identifying a suitable investment strategy. 

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