“The first dip is almost always bought”

In my experience, the first dip is almost always bought, but it’s after a sustained correction that investor behaviour is truly tested. I can only hope investors remain disciplined, states Abhishek Singh, Fund Manager, DSP Mutual Fund.

Can you elaborate on your investment philosophy and how it shapes your approach to fund management?
The only way to operate in a world that constantly surprises consensus is to buy low implied expectations. You buy at a point where a lot of negative news is already being factored into the stock price. If you execute it well, you create a portfolio that is open to positive surprises. Philosophically, the fund manager’s role then becomes curating a portfolio that is effectively long serendipity. The focus is on protecting the downsides – the upsides take care of themselves.

How do you balance long-term wealth creation with short-term market fluctuations in your investment strategy?
In my view, balancing short-term performance with long-term wealth creation is a source of pain and heartburn in the industry—and no one indeed manages to do it well. A better approach is to embrace short-term fluctuations and attract investors who do the same. If your operating principles are sound, short-term deviations become an advantage rather than mistakes.

We are upfront, clear, and consistent: my funds won’t beat their benchmarks monthly, quarterly, or yearly. The goal is to beat them convincingly over full cycles - typically 5 to 7 years.

What role does sector rotation play in your portfolio decisions, especially in the current economic scenario?
Sector allocations are an emergent outcome; they increase when multiple ideas in a sector pass our filters, signalling a low downside. A few years ago, healthcare in my portfolio rose from 5 per cent to 18 per cent before returning to single digits.

At its peak, many businesses in the sector effectively assigned a negative value to their export business, making the downside negligible. I had no clear visibility on the upside at that point. In well-executed value investing, that visibility is rarely necessary.

DSP Top 100 Equity Fund has shown a remarkable improvement in ratings, jumping two notches from 1 to 3 stars and continuing this upward trajectory this year. What key strategies or factors have contributed to this consistent performance enhancement?
We are active, taking significant calls across stocks and sectors, irrespective of the benchmark. At the same time, we are conservative—we take exposures in ideas where we feel the downside is lower. We also aim to be rational, avoiding sectors or themes where we see significant excesses.

This benchmark-agnostic active approach has served us well. While it comes with intermittent volatility—causing deviations from the benchmark on a monthly, quarterly, or yearly basis—we believe that over the medium term, this is the only way to generate strong cross-cycle returns.

AMFI data shows a 3.56 per cent MoM decline in equity mutual fund inflows in January 2025, yet the figure remains strong at Rs 39,687.78 crore. How do you interpret this trend amidst a declining domestic stock market?
Flows do not determine stock prices or market levels in the medium term. As I mentioned earlier, focusing too much on the short term is futile. Markets can move even with zero volumes on screen (think upper or lower circuits). The marginal buyer or seller needs to step away for sharp price moves.  At the same time, rolling returns across many indices are moderating.

In my experience, the first dip is almost always bought, but it’s after a sustained correction that investor behaviour is truly tested. I can only hope investors remain disciplined.

Large-Cap fund inflows surged by 52.3 per cent to Rs 3,063.33 crore in January, according to the latest AMFI data. Do you see this as a shift toward safer investments, or are there other factors at play?
Large caps offer the best risk-return in a market that is cheaper than before but not outright cheap. In recent months, small and Mid-Caps have corrected more than large caps, and the shift in flows could be a reaction to that. The large-cap category had been overlooked for some time—this may be a natural rebalancing of investor behaviour.

Which sectors do you believe are poised for growth in 2025, and how are you positioning your funds to take advantage of these trends?
Financials and select stocks in the Auto & Oil & Gas sectors seem to have decent risk rewards. The portfolio reflects this view.

Lastly, what advice would you give to new investors looking to invest in mutual funds in the current market volatility?
You need to be conservative in the short term to be aggressive in the long term. Investment returns go to those who are not chasing them too vigorously. A simple asset allocation plan, executed with discipline using simple products, leads to far better outcomes. Reduce engagement and activity.

At 12 per cent CAGR, Rs 1 becomes Rs 30 in 30 years. Yet, many investors end up with single-digit post-tax returns by chasing higher numbers. Be among the few who actually achieve 12 per cent. You'll avoid many mistakes if you stay disciplined and are genuinely content with low double-digit returns. And if gods are kind (and your fund managers rational), your eventual returns could even be higher.

Disclaimer: The opinions expressed above are personal and may not reflect the views of Dalal Street Investment Journal.