Follow A Systematic Approach

Can you describe your investment philosophy for us?

We follow a fundamental approach to investment. As far as the micro-cap fund is concerned, our approach is largely bottom up stock selection. Whereas in our large-cap funds we follow a mix of both top-down and bottom-up strategy. We try to have a fair mix of growth and value stocks in our portfolios. Any investment is generally undertaken with a minimum 1 year time horizon in mind aft er carrying out in-depth analysis. Management’s credibility and capability also play a very crucial role in deciding upon the company.

What is your take on the present investment climate in India?

The investment climate in India has been subdued over the past five years. Th is could be attributed to the slow pace of project approvals and slower pace of environmental and forest clearances. Land acquisition issues and mining bans have also slowed the pace of investment growth within the country, the result of which is the slowdown in GDP growth over the past 5 years. A stable government could help revive the investment climate by encouraging new project announcements by corporates and re-starting the stalled projects.

What is your take on interest rates for CY14? Do you foresee both of them coming down aft er considering the recent step taken by the RBI? 

Interest rates are likely to stay higher mainly on account of high inflation. While infl ation (WPI and CPI) has come off from their highs in recent months, food infl ation may see a comeback should an EL-Nino (a weather condition which may impact the south west monsoons) situation occur as predicted by IMD. However, should infl ation show signs of a further moderation, it would provide fl exibility to RBI to cut rates later this year.

Does the concept of ‘buy and hold’ still stand true, particularly in the present scenario when sector rotation is happening at such a fast pace?

 Buy-and-hold as a concept is a good concept. But now-a-days the dynamics of the business change very quickly. Also the cycle time has become short. Hence one can follow buy-and-hold strategy but has to be very actively involved in identifying material risks to the business and react quickly.

Is it possible to recognise a bear market before it is too late?

On the basis of the macro-economic indicator it is possible to make a fair assessment about the expected trend. But it is not necessary the market may follow that trend. Besides the broad fundamentals, market movement are also linked to various factor like Foreign Institutional money fl ow, government policies, news fl ow, etc. which one cannot predict. Hence the best strategy is to focus on good investment backed by adequate research and ignore short term market movements.

What is your take on the present valuations of the India markets?

At 22,575 the BSE Sensex is trading at a P/E of around 14.8x FY 2015 earnings which is near the long term average which is reasonable. From a global perspective, EMs look

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attractive versus DMs. Within EMs, India stands out due to the various steps taken by the Government in the past six months which has resulted in a sharp improvement in the country’s current account defi cit and fi scal defi cit. Th e currency has also stabilised which should comfort global investors. Markets are expected to re-rate further if we get stable government at the centre with development oriented mandate.

What is your advice on playing with the markets till the General Elections of 2014?

We advice investors to stay invested and increase allocation at any decline in markets. India’s macro situation is much better compared to last year which should not be ignored. Th e other comforting factor is that we are not expensive as a market and are trading near long term average multiples. Currency stability would help India from a global investor perspective as well.

What are the triggers that you are looking forward to, with regards to the markets?

A stable Government will be the most important trigger for markets along with a fall in inflation which has remained high over the past couple of years, mainly driven by food inflation. A cut in interest rates (should infl ation fall) will revive the investment climate and demand for capital.

What are the sectors that you are currently betting on, and in which areas should investors take caution?

We have a favourable view on Financials, Industrials, Consumer Discretionary and Information Technology, while we continue to have a cautious view on Utilities and staples/FMCG.

What advice would you like to give to retail investors at this juncture?

It is very important for retail investors to follow a systematic and consistent approach towards investment. It has been observed in the past that retail investors tend to get swayed by the market movements and end up investing larger chunk in equities at or near market peaks. Hence it is very important to ignore the noise and follow a consistent approach and pay attention to asset allocation and investment horizon. A systematic approach to investments is the key to successful investing.