What is the philosophy of fund management you or the fund house follows?

We have an objective or mandate and we make sure that we follow the mandate and deliver results. We make sure that we focus on the benchmark and stick to that and look forward to outperform the same. Outperforming the benchmark is our prime objective and this is how we feel that we add value for our customers. Markets can go up and down but if we beat the benchmark we feel that we are creating value for our investors.

Are there any systems that you follow while investing?

We have a very strong in-house product management system that decides upon the concentration levels, liquidity levels and how much
corpus should go into a particular scheme. We are very fundamental in our approach and we use both; thematic approach as well as bottom fishing approach of stock picking. We look at the business model and also look at the scalability of the company.

How do you rate a company's management?

As far as the management is concerned we look at the impact that the management can have on the growth of the company.

Apart from the above what else do you look at while investing?

The last is the valuation part in which we look forward for potential re-rating and de-rating of companies. We are very cash flow and balance sheet focused. We look at companies with improving cash flows. That factor matters a lot to us. In a market where uncertain atmosphere prevails we find that in the medium term these companies can do extremely well.

How important according to you is talking to the management of the company?

Any new company that we bring into our portfolio we make sure to visit the company and we will not enter a company that we have not visited.

We have seen that many fund managers deviate from the mandate that is given to them. Why do you think they do so?

Like I said, it depends on the checks and balances within the organization. It all starts with the internal monitoring within the organization, like whatever we do has to be done with spirit. We have review committees and investment committees that carry out various checks and balances. We have a very strong audit process and all this is brought at the board levels. So, you know it is very difficult to deviate from a mandate as it comes out immediately.

Do the stock ideas that you normally invest in come from your in house research team or else how do you pick stocks?

Like I said, we have tools that generate good ideas. Changing management focus or change in cash flows drives our decisions. We also have what we call the valuation momentum analysis, where we look at the earning cycle and intrinsic valuation. Secondly we do very thorough research. We have never taken any position without visiting the company. We make sure that we meet the key person of the particular company on a one to one basis. Based on the various inputs provided by the company we arrive at an investment decision.

Don’t you think that the information that comes from the management side of any particular company is somewhat directed to generate better views on the company?

When we go to meet a management we have three main objectives that will help the company to be re-rated. The first will be addressed towards the balance sheet of the company, other part of the discussions are more general. See what happens is that if we meet a company we find that they have a brilliant strategy but we focus on how these strategies are implanted. We have very experienced talent pool who are able to sit in the meeting and walk out of the meeting saying that whether the company will be able to implement the strategy or not. We always have large set of questions and we often find that when we reach the second level of questions the management fails to answer those. This gives an outlook that the management has forward looking vision but they have no clear ways to implement the strategy they are referring to.

Do you look at technical analysis as well?

What I can say is that almost 90 to 95 per cent of our portfolio is based on fundamental analysis. There are few segments that do technical analysis but that are more of a supplement in addition to our investment philosophy. It is fundamental first and then we check on the charts.

What are the three basic parameters that will define your entry into a particular stock?

Clearly as I have said, it has to come from our team, it has to pass our approach and the overall philosophy has to be met, that is has to be strong on the balance sheet and cash flow front. Another approach is the thematic approach. It is one where you may find a company with strong management and balance sheet but the valuations are bit on the higher side. In these cases, we apply thematic approach.

Is it really possible for someone to time the market?

It is very difficult and there is no doubt about it. For the timing perspective what we try to do is that we see the roadmap or the calendar of events that could happen in the company, like completion of capex programme and we try to time when these events will happen and based on these we try to work our strategy. We do not really try to time the market, if we like a company and think that there is likely to be a positive trigger in the next six months then we will take position in that.

Is it possible to really predict a bear market?

The way you look at it is that it is all function of valuation. We have some valuation cum liquidity tools that tell you whether the markets are oversold or overbought.

You have been a global strategist for Kotak. So you have seen both the global as well as the domestic market. How mature are the Indian markets and Indian investors?

Whenever we go and meet global investors what we find is that a major part of the discussion is based on the macro front. From a retail investor perspective what we have seen is that a certain level of maturity has come about. What I have seen over the years is that we have seen a level of maturity building up amongst the investors. They are aware that the equities are cyclical in nature and also they cannot time the markets.

What is the one main advice that you would like to give to retail investors?

First of all when you are investing in equities you have to keep in mind that the markets may go up as well as down. When all are talking good on the markets one must take a cautious view. When everybody is talking of bad in the markets and the prices have received a beating then you can buy as at these levels the valuation parameters are on the lower side and all negatives are priced in. Be patient while investing in equities and take a long term view rather than a short term view. Equities are asset class that gives you returns over a particular time period. Returns can be very handsome if you can buy into markets like these. SIP in my opinion is the best way of investing.

There are times when a specific investment idea does not work. How do you as a fund manager tackle these situations?

There are systems in our analytics where if a particular stock is not performing then it comes up automatically and shows that I have a particular stock that is not performing. This comes up for review and we have had to take a call accordingly. We also do what we call as impact analysis. If we see value in that company we take positions because we know that it is merely a matter of time before the market sees the value and the stock is re-rated. The risk reward is not important, what is important is the trigger. We look forward for the trigger that can come from various avenues like interest rate cuts, government policies and exchange rates, etc.