"Having a macro view has become very important" - Lalit Nambiar

How did you come into the fund management industry?

I started as a research analyst 18 years back and worked with an investment banking unit for a couple of years. Till five years back I was with the equity sell side and then joined UTI. I took up fund management for a pharma fund as I have a pharma sector research coverage background. I gradually went up the ranks to take over as the head of research. This is a short introduction of how I came into fund management. 

What is the investment philosophy that you follow?

As far as the investment approach is concerned, I am very much dependent on the macro developments or rather you can say that I am a macro-driven person. However, micro is important too as it helps in deciding on which sectors you may like to cash in. Looking at all the developments, you sit across with your analysts and use a bottom-up approach for arriving at a decision. We believe in both top-down and bottom-up approach to investing. The top-down approach is more looked upon by the fund managers and the bottom-up approach more by the analysts. This way we converge our views to zero in on the top two or three stocks in a sector that can work for us. Considering the last few years, if you have got the sector wrong then it is going to hurt you, but on the flip side if you get the sector right and the stocks wrong then it will not affect you as you can choose other stocks in that sector. Having a macro view has become very important because global developments, liquidity, etc play an important role. 

If you look at our Indian markets you would agree that we have to look forward to or focus on a finite number of stocks. The basic idea is to get to the incremental news flow or rather to the incremental worth of that stock. How do you subscribe to this idea?

As I told you just now we have to look into two things. There are differences on how you manage a large scheme and a small scheme. There are different mandates for both teams. We have a longer term horizon to look at the stock as compared to others. If we find that a stock is below its intrinsic value we buy that stock. In the current market scenario if you feel that after buying a stock the stock has reached its intrinsic value then it is always better to get out of the stock. Then there are situations when you feel that a stock may give better returns going forward and that is when you decide to buy it. So it basically swings like that. 

What is the research methodology that you follow?

In terms of research we have a team of eight people and each covers two major sectors and a couple of minor sectors. They do detailed research in the top 20 stocks in each sector that they are tracking. They have built models of their own. These teams are working more as an in-house sell side research team. We look forward to factors that can affect the movement of a stock. In a particular industry if some stock is trading below the valuation of the industry we rate the stock. The final call depends on the fund manager.

If you find that a particular stock has not performed, how do you tackle the situation?

We always have in-house meetings and discussions where we review the performances of the funds as well as the stocks that we have been holding. We have different approaches. For example, someone may be more mid-cap-oriented while some are more focused on large-cap ideas. 

You had once said that you read a lot. Can you tell us what exactly do you enjoy reading?

It depends on the mind frame of a particular person. As an analyst you should go through all the financial reports of the companies that you are tracking as well as the research reports prepared by the different broking houses. A more important factor is to read the interviews and blogs of persons whom you cannot meet often to get their views, for they share their views that can give you a perspective and may improve or sharpen your thought process too. It is like exercising your mind the way you exercise your body.

What are the crucial points that you should keep in mind while entering and exiting the stock?

There are several approaches of looking at a stock. When you are looking at a stock, there is also going to be another person looking at it too and there is already so much of research taking place that to search for the incremental news which can act as a trigger becomes really difficult. What I believe is that determining the entry and exit comes with experience. 

Technical analysis is going big today. What is your take on that?

I would not like to get into any controversy about whether technical analysis or fundamental analysis is good or bad. One thing you can always do is to have technical as well as fundamental analysts in your team. 

You might have gone through a situation where an investment idea that you have made has gone wrong. How do you tackle that kind of a situation?

Such situations are bound to occur in anyone’s career. The best way to tackle this is by keeping a check on your ego. When you feel that all the decisions that you make will not go wrong, then at that very moment you are finished. You should admit to the fact and get out of the stock by minimising your losses and look forward to other avenues that may give better returns going forward. Such a thing should become a learning point and you should move on to the next level. 

Does buying and holding for long term really work as a concept?

What we buy here is for the long term. It’s important to get a fix in your mind about the percentage of return that you are looking forward to. 

We have always heard people meeting the management while arriving at an investment decision. Does that really work?

You need to have a very deep thought process as the management will always speak as though their stock is always a ‘buy’ idea. The main thing that you have to look forward to is that whether the management is suppressing any fact or not. This comes from experience. 

Is it really possible to identify a bear market before it actually comes?

The answer to your question is that it is very difficult to predict such markets. We keep it in the back of our mind that such a situation may arrive. The one thing that you have to remember is that it is like a moving pendulum and you cannot catch it in the middle. Therefore, it is like you buy at the lower swing of the pendulum and sell at its higher swing.

Do you think there is too much of media noise around and that hurts investors in some way?

If you are talking about television channels, yes I think so. I wish there was a little bit more sensibility in media, and especially television media. People are also getting too lazy. It is easy to listen to something on TV and do it rather than sit and read. Today people want quick stuff. In terms of evolution, we should actually be looking at the long term but what is happening today is actually the reverse. We are looking at instant gratification. People need to stay away from this noise or in other words cut out a lot of it and look at only what is needed and meaningful. 

What advice would you give to retail investors?

It is always advisable to follow the mutual fund route rather than buying on your own. This is because an individual does not have the time and resources to do research on a particular stock or sector. 

Is the fund management community really working towards safeguarding the interest of the retail investors?

There are different approaches undertaken by different fund houses. It can work for you and against you as well. 

You have a fund manager that helps you find stocks. So who helps us find a good fund manager?

Good question. The past and present performances are the main criteria. But I think what one should be looking at more than performance is the process that is being followed by a fund manager.