 Mr. Rupesh Patel | In an interview with Anjali Raulgaonkar from Capital Market Publishers, Rupesh Patel, Fund Manager, Tata Asset Managementsaid, Igenerally desist from investing in companies which, in the past have shown scant regard for minority share holders' interest and the ones which have a history of bad capital allocations. Excerpts: 1. Equity markets are already up. Is there more room to grow? How are you approaching market right now? Like most of emerging markets, Indian equity markets have delivered stellar returns in CY'17. Those returns came on the back of improving macro as reflected in lower current account deficit, benign outlook on inflation and interest rates and soft crude prices. Lot of those macro tail winds seem to be normalizing. Further, on the domestic front, lot of volatility is expected on account of important state elections over next few months. In such an environment, stock performances would be a function of earnings visibility. We continue to maintain our positive stance on construction companies, private sector banks and consumer facing businesses. 2. What is your investment space? Any stock specific traits which makes it part of your portfolio? What?
In terms of our investment universe, we broadly focus on two sets of companies. First would be companies which can compound their earnings over a long period of time, are efficient users of capital, run by decent managements and have innate strengths in their business models. These form the core of our portfolio. Second set is of opportunities, which are more tactical in nature, exist in market due to stock specific/industry specific/market specific developments and makes sense to buy at certain price. 3. What kind of stocks you avoid, why?
In investing you never say never. However, I generally desist from investing in companies which, in the past have shown scant regard for minority share holders' interest and the ones which have a history of bad capital allocations. 4. Have you made any changes in your funds after the Union Budget 2018-19? What and Why?
We keep evaluating opportunities based on the intrinsic values of the businesses and prices at which they are available in the market. Changes to portfolio are often done to capture a relatively better risk reward opportunity as compared to our existing holdings. Thus announcements in the budget have not led to any specific changes in the portfolio and our core portfolio holdings have continued to remain same. 5. What will be your advice to investors?
Equity is a volatile asset class and has delivered superior tax adjusted returns over longer periods. However, to benefit from the same, one has to remain invested through the volatile phases. Hence, investors should not get too much worried about events which may have near term impact. We believe, India offers a long term growth opportunity on account of its demographic profile, rising per capita incomes, increasing urbanization and shift from unorganized to organized players. Hence, equity market corrections can be considered as good opportunities by investors to increase their equity exposures.
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 Mr.Murthy Nagarajan | In an interview with Anjali Raulgaonkar from Capital Market Publishers, Murthy Nagarajan, Head Fixed Income,Tata Asset Management said,In short-term funds, we focus on regular accruals and run a low duration strategy. On long term funds, we focus on active duration management. Excerpts: 1. What are your views on fixed income market? How have the yields moved and which direction you see them moving in near to mid-term and why? What will the key driving factors for yields? We have a dovish policy bias because CPI is tracking 50bps lower than RBI's February policy projections and growth is on recovery path. We expect RBI to take cognizance of lower CPI, correction in base metals and other commodities except Brent and still negative output gap, in its upcoming monetary policy on April 5, 2018. Government had over-delivered on making the demand-supply dynamics favorable, this has led to a downward shift from 7.40%-7.80% earlier to 7.00%-7.50% (Currently trading at 7.30% post H1-2019 borrowing calendar announcement). Recent comments in media regarding FPI limit hike are giving mixed signals. Now that government has taken care of demand-supply balance, we expect RBI to be cautious in increasing the FPI limit (may not do so at all in April Policy). However, a gradual (slower than earlier envisaged) road-map for FPI limit hike cannot be ruled out. 2. What is your strategy for short term funds? What is your exposure to long term funds and why? In short-term funds, we focus on regular accruals and run a low duration strategy. On long term funds, we focus on active duration management. 3. Have you made any changes in your funds after the Union Budget 2018-19? What and Why? Borrowing program and fiscal deficit were on higher side in the union budget. Fiscal slippage is never good for fixed income market. Further, the minimum support price (MSP) hike announced in budget was inflationary. Exact impact of MSP hike is difficult to envisage at current juncture but estimates vary from marginal to 90bps. We had reduced duration post budget and continued with low duration strategy in March. 4. What is your advice to the investors? Having fixed income allocation balances portfolio and provides stability. I think everyone needs to have some exposure to fixed income (debt funds). Like any other asset class, even debt funds have risk entailed, primarily interest rate risk and credit risk. While managing allocation across debt funds, one could look at adding interest rate risk at earlier stages and gradually switch this into regular accruals as age progresses. While managing such allocation, one should also keep in mind the broader cycles (macro factors have more bearing on debt funds) and avoid adding /reducing risk that is not commensurate to longer objectives.
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 Mr.Avnish Jain-Head of Fixed Income | In an interview with Anjali Raulgaonkar from Capital Market Publishers, Avnish Jain, Head Fixed Income, Canara Robeco said, We expect RBI to remain on hold in the February policy. Hence the correction in yields may have been overdone. Excerpts: 1.What are your views on fixed income market? How have the yields moved and which direction you see them moving in near to mid-term and why? What will the key driving factors for yields? The yields have been on upswing for past few months as rising oil price have fueled concerns of higher inflation. Higher CPI on back of high food prices have further impacted sentiment. The market rates have gone up a lot in a short period of time. In short term we expect market to consolidate at current levels. The key factors for the markets will be the Union Budget and monetary policy committee outcome. Government sticking close to fiscal numbers will likely improve market sentiment. Global oil prices will also continue to impact market yields 2.What are your expectations from Union Budget 2018-19? We expect the Government to stick to the fiscal consolidation path, though the glide may undergo some change due to likely short-term growth disruptions caused by GST implementation. 3.What is your strategy for short term funds? What is your exposure to long term funds and why? Both short term and long-term rates have gone up considerably in past few months. We expect RBI to remain on hold in the February policy. Hence the correction in yields may have been overdone. The current levels of short term rates are attractive, considering that overnight rate is still hovering below repo rate of 6%. Inflation is likely to peak out at 5% and show a downtrend thereafter. We expect CPI to remain largely near RBI's target of 4% in the short term obviating a need for rate hikes. Further investment cycle is yet to gain a strong foothold, and higher rates may crimp any chances of pick-up in growth. Hence from longer term perspective short term funds provide an attractive investment option. Over long term we GST to be beneficial both on revenue side as well tempering inflation. This is likely positive for long term rate movements. 4.What is your advice to the investors? The sharp rise in rates last few months provide investors good opportunity to increase allocation to debt funds, in a phased manner, depending on investment horizon and risk appetite.
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 Mr Mahesh Patil |
In an interview with Anjali Raulgaonkar from Capital Market Publishers, Mahesh Patil, Co-CIO, Aditya Birla Sun Life AMC said, We could see broad based growth across sectors and the pressure points on some of the sectors are easing off. We continue to follow the philosophy of investing in companies that could show growth and are available at reasonable valuations. Excerpts: 1. Equity markets are already up. Is there more room to grow? How are you approaching market right now? The performance of markets in 2017 has been impressive with a return of about 30% on large cap indices. However, if you look at longer term returns on a 3/5/10 year basis, it is low. The important thing to note is that both in terms of economy and corporate earnings, we are at the bottom of the cycle. While the P/E expansion may not happen much but the catch up with earnings growth is possible. We are estimating 19% growth for FY19 for Nifty 50 companies. We could see broad based growth across sectors and the pressure points on some of the sectors are easing off. We continue to follow the philosophy of investing in companies that could show growth and are available at reasonable valuations. 2. What is your investment space? Any stock specific traits which makes it part of your portfolio? What? We have more than 300 companies in our investment universe across market capitalizations. We look at companies that have strong competitive advantage, faster growth, good management, large addressable market, superior product, technology etc. 3. What kind of stocks you avoid, why? We are particular about investing in quality stocks that correct less in market correction and rebound quickly in case of market recovery. We keep our portfolio well-diversified portfolio, while staying away from high momentum stocks. 4. Is there any pre-emptive miss you regret (for instance, not adding a particular stock in your list or not possessing enough of it)? When we invest, we formulate a certain thesis on each individual investment to predict what should be our target price. There are certain periods where that thesis does not play out and plays out different. This could lead to misses. Most times we get back to basics to re-analyse our assumptions and how we defer from market opinion. It is part and parcel of fund management. As long as we capture more correctly than missing opportunities, our fund performance should be alright. 5. What will be your advice to investors? There is full conviction that India has strong growth potential in the medium to long term and the stock markets provide an opportunity to participate in it. However, the return expectation should be reasonable. As long as investors are seeking lower double digit returns for a 3- 5 year investment, they should not be disappointed. The synchronous global growth, continuous reforms from government that should bear results going forward and earnings rebound in second half of fiscal augur well for markets.
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 Mr Akhil Mittal | In an interview with Anjali Raulgaonkar from Capital Market Publishers, Akhil Mittal, Senior Fund Manager, Tata Mutual Fund said, In current markets, an investor looking to invest in bond funds or long duration funds should have a long term holding horizon (2-3 years) for making reasonable returns. Excerpts: 1.What are your views on fixed income market? How have the yields moved and which direction you see them moving in near to mid-term and why? What will the key driving factors for yields? After witnessing a deep 200 bps easing cycle from RBI, wherein the 10-year benchmark yield fell from 9.10% in Jan 2014 to 6.20% in December 2016, the yields saw a hardening bias till April 2017, wherein the 10-year benchmark yield touched 6.98%. This can be attributed to change in monetary policy stance from accommodative to neutral by RBI in Feb 2017. Post that, the headline inflation (CPI) fell sharply to 1.54% in June 2017, much below RBI expected inflation target, leading to 25 bps rate cut by RBI. This saw 10-year benchmark yield fall to 6.41% by July 2017. However, post July 2017, inflation has been inching up and last recorded a high of 4.88% in December 2017. This has led to an expectation of end of rate cut cycle, with some market participants not ruling out a rate hike in 2018 calendar year. In its objective to reduce surplus liquidity from banking system, RBI did OMO sales of government securities to the extent of INR 900 bn. This exerted pressure on yields. Also, there have been increasing concerns over the government's likelihood of meeting its fiscal deficit target, as there has been a significant shortfall in revenue collections of the government while expenditures are tracking ahead of budget estimates. With likelihood of breach of fiscal deficit target, there is a possibility of further borrowing by government. All these factors put together, have led to significant hardening of yields. 10-year benchmark yield has reached a level of 7.30% as of 22nd December. Going ahead, we expect yields to remain range bound and witness a sideways movement till there is a clarity on Fiscal management by government, trajectory of inflation, especially with regards to crude prices, and GDP growth (a higher GDP growth will reduce any chances of rate cut). Market will look ahead to budget and we do not expect any major change in yields till then. For now, we expect 10-year benchmark yields to remain in range of 7.10% to 7.40%. 2. After the RBI policy rate status quo, where do you see the bond yield moving (long-term bond yields and short-term bond yields both) In its last monetary policy review, RBI kept key rates unchanged and signaled a cautious bias on rising inflation and uncertainty on fiscal. RBI also moved its expected inflation trajectory upwards for March 2018. This led to hardening of yields post policy review. With crude prices remaining high, and volatile food component still showing upward pressure on prices, there is a likelihood of inflation print recording higher than RBI expected trajectory. With base effect also coming into play, we expect inflation for month of December to inch up beyond 5%, thereby putting further pressure on yields. With RBI removing surplus liquidity from system and moving towards neutrality, we believe even short term rates will come under pressure and entire yield curve shifting upwards. 3. CPI and WPI have been inching up. Where do you see them heading? Why? Both CPI and WPI have been inching upwards since June 2017. From a low of 1.54% in June 2017, CPI has moved sharply up to 4.88% in December 2017. WPI has also moved up from low of 0.90% in June 17 to 3.93% in December 2017. High crude prices, rising services inflation (education and medical), hike in HRA by central government and some state governments, and higher food prices led to sharp increase in both measures of inflation. Going ahead, we expect inflation to remain in higher trajectory. With crude prices expected to remain high, and no respite expected in food prices, there isn't much scope for inflation to come down. Also with more states expected to hike HRA, there would be statistical rise in inflation gauge. If government also decides to deviate from fiscal consolidation and adopts an expansionary mode to boost growth, it might also add to generalized inflation. Given the base effect coming into play, we expect inflation to move beyond 5% in December 2017 and peak in June 2018 within 5% - 5.50%. Thereafter we expect inflation to come down and move closer to RBI medium term target of 4% by March 2019. 4. What measures RBI will take to control inflation? What will be its impact on yields? Within the monetary policy framework, RBI has only Repo Rate as a tool to manage inflation. If inflation moves higher than RBI expected trajectory and is expected to remain there, RBI can hike repo rate to meet its medium-term target. Prima facie, this will have an adverse impact on yields and we might see an upward shift in entire yield curve. However, the magnitude of rise in yields will be a function on how much rate hike RBI would be expected to do. For instance, if one expects RBI to hike only by 25 bps to meet its target, we would expect yields to move up by 20-25 bps only. If there is an expectation of further rate hikes, then yields would move much more. 5. What is the ideal time frame which an investor should look at while investing in bond funds in current markets? In current markets, an investor looking to invest in bond funds or long duration funds should have a long term holding horizon (2-3 years) for making reasonable returns. With uncertainties hovering around macro indicators, there is low near term possibility of easing. This would mean that any capital gain opportunity from downward movement in yields would take longer to realise. Hence, investors need to have longer holding horizon for investing in bond funds. 6. What is your strategy for short term funds? What is your exposure to long term funds and why? Tata Short Term bond fund aims to generate regular accruals through investments in high credit quality debt and generate capital gains from fall in interest rates. The average maturity of the fund has been in range of 2 years to 3 years in recent past given the easing monetary policy cycle. However, with inflation inching up and monetary policy cycle expected to be on pause mode for foreseeable time, we are currently cautious on duration. We have positioned the portfolio more towards regular accruals and lesser towards achieving capital gains from duration. 7. What's your investment strategy? We follow a philosophy of SLR in managing our Fixed Income Portfolio's where S for Safety, L for Liquidity and R for Returns is the guiding principle. We maintain high credit quality in our portfolios and do not go down the credit curve. This ensures safety of capital of investors. While allocating the portfolio, we maintain ample liquidity to ensure swift change is possible in case of change of stance / events. Returns are envisaged to be generated in line with objectives of the scheme and risk is contained in the process 8. How often do you re-balance your debt allocation? We keep a close watch on markets and our portfolios. In case any event / occurrence in the market requires a change in stance, or any developments wherein our views have changed, we rebalance our debt allocation on real time basis. This is a continuous process and not dependent on period / pre-specified date. However, we have formal process of discussions / market update and forming a view on markets. We do this through Investments Committee meeting / Debt Investment Committee meeting, which happens periodically 9. What is your advice to the investors? We would ask investors to stay invested for a longer time period and choose product category depending upon their risk appetite. If one has greater appetite for risk and longer holding horizon, long duration funds could be considered, whereas for investors with shorter investment horizon and / or lower risk appetite, short duration funds could be considered.
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 Mr Rupesh Patel | In an interview with Anjali Raulgaonkar from Capital Market Publishers, Rupesh Patel, Fund Manager, Tata Asset Management said, Equity market corrections can be considered as good opportunities by investors to increase their equity exposures. Excerpts: 1. Equity markets are already up. Is there more room to grow? How are you approaching market right now? Indian equity markets have delivered very strong returns in last 12 months with benchmark Sensex delivering about 28% returns and BSE Midcap Index about 46%. It would be prudent for investors to moderate their return expectations and not to extrapolate the returns. We believe from hereon; stock performances would be a function of earnings growth. As effects of demonetization and GST abate, the earnings growth should start improving in coming quarters. With the outlook on global growth improving and credit costs normalizing for the banking sector, the outlook for earnings growth on aggregate basis in FY'19 and FY'20 is positive and in high double digits. In terms of portfolio construction, we continue to maintain our overweight on beneficiaries of government sector capex and consumer plays. 2. What is your investment space? Any stock specific traits which makes it part of your portfolio? What? In terms of our investment universe, we broadly focus on two sets of companies. First would be companies which can compound their earnings over a long period of time, are efficient users of capital, run by decent managements and have innate strengths in their business models. These form the core of our portfolio. Second set is of opportunities, which are more tactical in nature, exist in market due to stock specific/industry specific/market specific developments and makes sense to buy at certain price. 3. What kind of stocks you avoid, why? In investing you never say never. However, I generally desist from investing in companies which, in the past have shown scant regard for minority share holders' interest and the ones which have a history of bad capital allocations. 4. Is there any pre-emptive miss you regret (for instance, not adding a particular stock in your list or not possessing enough of it)? I regret missing on some of the long term structural compounding stories, particularly the ones where I did not buy or exited early considering high near-term valuations. 5. What will be your advice to investors? Equity is a volatile asset class and has delivered superior tax adjusted returns over longer periods. However, to benefit from the same, one has to remain invested through the volatile phases. Hence, investors should not get too much worried about events which may have near term impact. We believe, India offers a long-term growth opportunity. In terms of earnings, we are at the cusp of recovery in corporate earnings and market returns would be reflective of the same. Hence, equity market corrections can be considered as good opportunities by investors to increase their equity exposures.
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 Mr. Ravi Gopalkrishnan | In an interview with Anjali Raulgaonkar from Capital Market Publishers, Ravi Gopalakrishnan, Head, Equities, Canara Robeco Mutual Fundsaid,We aim to invest in fundamentally strong businesses and our team analyzes the fundamental attributes, historic business performance, recent developments in operating environment & future expectations.
Excerpts: 1. Equity markets are already up. Is there more room to grow? How are you approaching market right now? The Indian Equity markets have reached new highs on the back of improving macro economic fundamentals and strong domestic flows. But despite the run up, the valuations of the overall markets are slightly above the historical averages. However, this must be put in perspective with the bond yields which have seen a secular decline over the past 3 years. Hence, if one were to look at equity valuations in conjunction with bond valuations, the expansion of P/E multiples is justifiable. Hence, we believe that over the long term there is a definite room to grow amongst global stagnancy. However, markets can get volatile as corporate earnings have not kept pace and a meaningful revival is still a quarter or two away. 2. What is your investment space? Any stock specific traits which makes it part of your portfolio? What? Strong research and robust processes that we follow before investing in a company is what really makes the difference for us. We aim to invest in fundamentally strong businesses and our team analyzes the fundamental attributes, historic business performance, recent developments in operating environment & future expectations. Only once a strong investment case is established, will a company be considered to be taken into the portfolio. More specifically, we like to look at companies which have a unique business model, with an ability to gain market share, companies where there is scope for value migration and last but not the least companies involved in Balance Sheet improvement and turnaround/restructuring cases. 3. What kind of stocks you avoid, why? We usually refrain from investing in highly leveraged companies, companies with a questionable management record on governance or companies solely dependent on outcome of events to drive growth. Such companies do not have any concrete or robust models for generating cash flows and hence no sustainable growth prospects. 4. Is there any pre-emptive miss you regret (for instance, not investing in a stock or not possessing enough of it)? Our portfolios have seen stable and consistent track record for the past several years. It has been our endeavor to select companies at reasonable valuations that could become a part of the overall portfolio. In the correction seen in Jan-Feb 2016, and post the demonetization exercise in Nov 2016, we could use the volatility in the markets to pick-up really good quality franchises across all sectors which had corrected. However, there are pockets in markets or themes we may have missed. For e.g we were not able to identify the turnaround in global metals cycle and hence missed that opportunity. 5. What will be your advice to investors? We continue to believe that Indian markets are in the Sweet Spot and offer a great opportunity for domestic investors to create long term wealth. As India moves ahead towards increasing prominence in an ever-more connected world, Indian capital markets could benefit tremendously from the long term positives offered by its demographics, conducive macro-economic environment, improving corporate earnings and government supported initiatives towards financial inclusion & tax reforms, though with a little volatility. For investors, it is advisable to invest in the markets with at least 3 to 5-year investment horizon. The reason for doing this is to smoothen out the volatility in the markets overtime. We believe, time in the market is more important than timing the market. Investors should focus on asset allocation instead of looking at absolute benchmark levels when making an investment decision.
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 Mr. Avnish Jain | In an interview with Anjali Raulgaonkar from Capital Market Publishers, Avnish Jain, Fixed Income at Canara Robeco Mutual Fundsaid,The current environment is conducive for longer term trend in interest rates. Investors should stick to asset allocation strategies and continue to invest in debt fund according to their respective risk profiles. Excerpts:
1. What are your views on fixed income market? How have the yields moved and which direction you see them moving in near to mid-term and why? What will the key driving factors for yields?
Fixed income continues to be driven by both local and global events, though local factors have far more weightage. Sharp fall in inflation since July 2016 brought CPI below RBI's target of 4%. CPI touched a low of 1.5% in June and this prompted RBI to reduce rates in August policy. Post that inflation has shown an uptick, primarily driven by few items in the food basket. Core inflation has also shown an uptick as GST got implemented and government finalized the recommendations of 7th Pay commission on allowances. In the near-term yields have inched up as near term expectations of rate cut have faded. In the medium term we are likely to see yield go down as slowing growth rate debate has taken center stage. With inflation largely under control, RBI may look to support growth in absence of any material fiscal support.
2. After the RBI policy rate cut, where do you see the bond yield moving (long-term bond yields and short-term bond yields both) Both short term and long term yields have moved up post RBI rate cut as further near term cuts are not expected by the market. However, as inflationary pressures of food prices is expected to subside post monsoon, inflation is likely to start moderating again. With growth concerns rising, it is expected RBI may ease policy rates further. Short term and long term bond yields should go down in the medium term.
3. July CPI and WPI have inched up. Is it the beginning of rise in inflation? Why? July CPI has gone up but remains below RBI's medium-term target of 4%. As food price pressures typically subside post monsoons, inflation should moderate on lower food prices. Further a sharp drop in growth coupled with GST implementation is likely to keep a lid on core inflation.
4. What measures RBI will take to mop-up excess liquidity? What will be its impact on yields? RBI is likely to continue to use OMOs, MSS and daily LAF operations to continue to mop up excess liquidity. With ample liquidity, there is likely to be no meaningful impact on yields.
5. What is the ideal time frame which an investor should look at while investing in a short-term fund?
An ideal time frame for a short-term fund is 1-3 years
6. What is your strategy for short term funds? What is your exposure to long term funds and why?
Short term fund is a combination of high quality accrual and some duration management. The fund predominantly invests in corporate bonds. Long term funds typical invest in government bonds and AAA corporate papers to maintain liquidity, as the duration is actively managed. The asset allocation between government bonds and corporate bonds depends on the available spread.
7. How often do you re-balance your debt allocation? All funds are actively managed in line with overall interest rate view.
8. What is your advice to the investors?
The current environment is conducive for longer term trend in interest rates. Investors should stick to asset allocation strategies and continue to invest in debt fund according to their respective risk profiles. Depending on the fund, the investment horizon should be anywhere from 1-5 years.
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 Mr. Pankaj Pathak | In an interview with Anjali Raulgaonkar from Capital Market Publishers, Pankaj Pathak, CFA - Fund Manager-Fixed Income - Quantum AMCsaid, Although the valuations are attractive in longer segment, at present there is a very high uncertainty in the bond market. Broadly, we expect bond yields (10year benchmark bond) to trade in the range of 6.60%-6.90% taking cue from fiscal developments. Excerpts: - What are your views on fixed income market? How have the yields moved and which direction you see them moving in near to mid-term and why?
Indian bond yields have moved up by around 30 basis points (100 basis point is equal to 1%) across the curve over the last three months. Multiple factors have contributed to this up move in yields. RBI's Monetary Policy Committee came across as inflation hawk and did not pay much heed to the growth slowdown. There had been repetitive media reports about fiscal stimulus and government not meeting the fiscal gap target. Global yields were on up move as FED started withdrawing the monetary stimulus. All these factors and the geo political tension in Korean peninsula caused a negative sentiment in bond market in the last three months.Now the bar for further rate cut is very high. At current levels, bond valuations are attractive but uncertainty about fiscal and inflation risk may play on investors' minds which could keep the bond yields elevated for some time. What will be the key driving factors for yields?With low probability of rate cuts, developments over fiscal deficit will drive the market in near term. Now after the announcement of bank recapitalization bond, the uncertainty in bond market has increased further. The finance ministry has not yet disclosed the modality of these bonds which leaves us with many possibilities about its impact on fiscal deficit and market demand-supply. Going forward, market will look out for any detail about the structure of these bonds and guidance about government's fiscal plans. After the RBI policy rate meet, where do you see the bond yield moving (long-term bond yields and short-term bond yields both)?Although the valuations are attractive in longer segment, at present there is a very high uncertainty in the bond market. Broadly, we expect bond yields (10year benchmark bond) to trade in the range of 6.60%-6.90% taking cue from fiscal developments. SeptemberCPI and WPI have inched up. Is it the beginning of rise in inflation? Why?Inflation is likely to move northward and print above 4% mark by Q1 2018 primarily due to adverse base effect and statistical adjustment of HRA increase under the 7th pay commission. We expect that CPI will remain within the RBI's target band of 4% (+/-) 2% over the medium term as the effects of supply side structural reforms will be more visible over the period. The new monetary policy framework with inflation as policy anchor added discipline to the inflation targeting process. This will encourage the RBI to remain proactive in tackling inflation risks. What measures RBI will take to mop-up excess liquidity? What will be its impact on yields?RBI has been relying on term reverse repos and OMO sale of government securities to absorb the excess liquidity from the banking system. Usually the cash demand increases during October-December quarter and we are witnessing the similar phenomenon this time as well. The currency in circulation has increased by INR 580 billion during this month up till 20th October. We expect the liquidity situation to normalize by the first quarter of 2018. RBI may stop conducting OMO sales from next month. What is the ideal time frame which an investor should look at while investing in a short-term fund?Given the substantial tax advantage, investors are better off investing in debt funds for over 3 years. This will also help in reducing the uncertainty of returns coming from volatility in market interest rates. What's your investment strategy?At Quantum, we follow a team based portfolio management approach. We conduct proprietary research for our investment decisions and follow a top down research and investment process. Although we believe that further rate cuts may not come through, still considering the attractive valuations we are maintaining above average maturity profile in the Quantum Dynamic Bond Fund portfolio. We remain vigilant about developments on fiscal front and actions of global central banks. How often do you re-balance your debt allocation?We follow a dynamic approach in taking investment calls based on our view on interest rate. Thus the re-balancing of portfolio depends on movements in market rates and our reading of the same. What is your advice to the investors?It has been a significant run in the bond markets since August 2013. Many of the bond funds have delivered double digit returns during this period. But investors should lower their return expectations from bond funds as capital gains will not be the driver of returns going forward. As the purpose of debt allocation for many investors is to provide stability to the overall portfolio, investors should also consider the possibility of capital losses when investing in longer maturity bond funds (if bond yields start rising).
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 Mr. Nilesh Shetty | In an interview with Anjali Raulgaonkar from Capital Market Publishers, Nilesh Shetty, CFA, ACMA - Associate Fund Manager - Equity - Quantum AMC Pvt. Ltdsaid, We have a liquidity filter of at least $1 million daily trading volume in the stocks that we own; apart from that we do not have any market capitalization or sector bias. Excerpts: - Equity markets are already up. Is there more room to grow? How are you approaching markets right now?
Earnings growth have not reflected the sharp rise in share prices significantly expanding the PE (Price/Earning) multiples. Despite factoring an earnings recovery, valuations look expensive. Our sense is downside risks are high at the current moment and investors need to be cautious. Markets can continue to rally based on flows but it will only further elevate downside risks. - What is your investment space? Any stock specific traits which make it part of your portfolio?
We have a liquidity filter of at least $1 million daily trading volume in the stocks that we own; apart from that we do not have any market capitalization or sector bias. We have a predetermined Buy and Sell limit for each stock actively covered by our research team. The limits are decided based on sustainable cash flow generating ability of a company and its long term valuation bands. Once a stock hits our buy limit it finds its way into our portfolio and once it hits our sell limit it exits our portfolio. - What kind of stocks you avoid and why?
Companies with weak corporate governance and a history of treating minority shareholders poorly do not come into our portfolio. - Is there any pre-emptive miss you regret (for instance, not investing in a stock or not possessing enough of it)?
There have been instances where companies have come very close to our buy limits but did not actually go below it for us to be able to buy, which later on have become multi baggers. But given that we follow a strict process, we do not regret not being able to buy the stock. - What will be your advice to investors?
We remain positive on Indian equities over the long term. However, we are cautious in the near term. Markets have seen a significant rally not supported by earnings growth. Upside in Indian equities is limited in the near term. The same is reflected in high cash levels held in our schemes. We suggest that investors looking to make a lump sum investment to stagger their investments. SIP investors do not need to change their investment allocation plan.
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 Mr. Pankaj Pathak | In an interview with Anjali Raulgaonkar from Capital Market Publishers, Pankaj Pathak, Fund Manager-Fixed Income, Quantum Mutual Fund, said, We expect CPI will remain within the RBI's target band of 4% (+/-) 2% over the medium term as the effects of supply side structural reforms implemented by the government will be more visible over the period. Excerpts: - What are your views on fixed income market? How have the yields moved and which direction you see them moving in near to mid-term and why? What will be the key driving factors for yields?
India had witnessed a remarkable disinflation in the last four years with headline consumer price inflation falling from double digit prints in late 2013 to near the lower bound of RBI's target range of 4% +/-2%. This resulted in more than three years long monetary easing cycle with RBI reducing the policy rate by 200 basis points (100 bps is equivalent to 1%) and still be able to maintain high real rates to attract significant foreign capital flows. Fixed Income market reflected the similar positive move with the bond yields falling from highs of around 9% to 6.5% in the last four years. Now with inflation showing some signs of firming up from here as increased pay packages of Central Government employees and higher cash in the hands of farmers due to series of farm loan waivers turning into consumption demand. The commodity prices are also showing signs of bottoming out and are likely to rebound as global growth picks up. RBI had also acknowledged these signals and changed its policy stance in the February policy from Accommodative to Neutral. We believe that there will be a long pause in RBI's rate action and this will lead to bond yields remaining in a very tight range in the near term. In medium term, bond market will look out for supply side structural reforms in domestic economy and will also monitor the normalization of monetary policy in developed markets. - After the RBI policy rate cut, where do you see the bond yield moving (long-term bond yields and short-term bond yields both)?
We expect that we have already seen the last rate cut in this cycle and that RBI is likely to keep rate on hold for some months. The Bond market may remain range bound near 6.5% levels (yield on 10 years benchmark paper) in the short term and await domestic and global trends to determine its future trajectory. This indicates that there is limited upside for bond prices from here. - July CPI and WPI have inched up. Is it the beginning of rise in inflation? Why?
The recent drop in inflation is to a large extent a result of the after-shocks of demonetization, which is likely to reverse in the months to come. This could lead the headline CPI inflation to above 4% mark by Q12018. However, the normal monsoon season and the good Kharif sowing of key crops does suggest that food production will keep tap on the upside in inflation. We expect CPI will remain within the RBI's target band of 4% (+/-) 2% over the medium term as the effects of supply side structural reforms implemented by the government will be more visible over the period. Further, the new monetary policy framework with inflation as policy anchor has added discipline to the inflation targeting process and will encourage the RBI to remain proactive in tackling inflation risks. - What measures RBI will take to mop-up excess liquidity? What will be its impact on yields?
The excess liquidity with commercial banks post demonetization remained a big challenge for RBI and huge foreign capital inflows in recent months further compounded the problem of managing surplus liquidity. Cash withdrawals from banks are also slowing down as much of the re-monetization has already happened. With limitation on issuing MSS bonds, RBI had is relying on term reverse repos and OMO sales to manage this problem of plenty. However, in our view, the pace of OMOs are too slow considering the extent of liquidity surplus. The RBI's newly proposed liquidity tool Standing Deposit Facility is still waiting for government nod. We expect that the liquidity condition will remain in surplus in the months to come and at the current pace these liquidity absorption measures will not affect the yields to any notable extent. However, if RBI steps up pace of OMO sales, we may see some pressure on shorter maturity bond yields. - What is the ideal time frame which an investor should look at while investing in a short-term fund?
Given the substantial tax advantage, investors are better off investing in debt funds for over 3 years. - What is your strategy for short term funds? What is your exposure to long term funds and why?
For fixed income exposure, we offer Quantum Dynamic Bond Fund (QDBF) which has the flexibility to change the portfolio characteristics (within the investment policy framework) according to interest rate scenario. QDBF invests primarily in government securities or in top rated PSU bondsand by its design the fund can take a form of long term debt fund or short term debt fund depending on the interest rate view. Our endeavor is to manage the interest rate risk on behalf of the investors so that they don't need to change their fixed income allocation when interest rate changes. - What's your investment strategy?
It has been a significant run in the bond markets since August 2013 with Indian bonds returning in double digits. But investors would do well now to lower their return expectations from bond funds as capital gains will not be the driver of returns going forward. Since the purpose of debt allocation for many investors is to provide stability to overall portfolio, while investing in debt funds investors should also consider the possibility of capital losses.
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 Mr. Pradeep Gokhale | In an interview with Anjali Raulgaonkar from Capital Market Publishers, Pradeep Gokhale, Senior Fund Manager, Tata Asset Management said, There is a saying 'Never say never' and this is true in the investment business also where there are examples of companies staging smart turnarounds from the brink of bankruptcy. Excerpts: - Market is at all-time highs and we have seen domestic liquidity driving this market. How are you approaching market right now?
Markets have had a good run since the beginning of this year and both domestic investors through MFs and FII have been buying equities. Valuations,for both Sensex as also the broader market are higher than long term averages but are by no means excessive.Valuations have gone up factoring in the improvement in India's macro-economic factors such as inflation, fiscal and current account deficit and declining interest rates. Now, earnings need to pick up for the markets to progress from here. Over the last few years, earnings growth has been weak due to issues such as high NPA levels in the banking sector, weak commodity prices, sector specific issues in IT and Pharma and recently the disruptions caused by demonetisation and introduction of GST. We feel the effect on earnings from many of these factors will start receding in the next six months and with good monsoons earnings growth should start to pick up. In the interim, we may see higher volatility in the markets. - What is your investment space?Any stock specific traits which makes it part of your portfolio? What?
We have an investment universe of about 450 companies. We prefer companies that compound their earnings over a longer time frame and which maintain a decent return on capital employed in the business. Management quality is another important aspect we consider before investing in companies. We believe buying a stock at a reasonable price is critical for longer term investment returns. Hence the valuation at which a stock is trading is a very important consideration. We also look at liquidity of the stocks and portfolio. Thus earning growth potential, return on capital employed, management quality, valuation and liquidity are the key parameters on which we base our investment decisions. - What kind of stocks you avoid, why?
There is a saying 'Never say never' and this is true in the investment business also where there are examples of companies staging smart turnarounds from the brink of bankruptcy. That apart, generally I try to avoid businesses with low entry barriers or where the level of value addition by managements is low, companies with high debt levels and history of capital misallocation. - Is there any pre-emptive miss you regret (for instance, not investing in a stock or not possessing enough of it)?
We did not have enough weight in the metals sector during 2016. We did pick some metal stocks at low valuations during February - March 2016 but booked profits early. - What will be your advice to investors?
We believe that Indian equity is a very promising asset class to invest in, over the medium term, despite the recent smart run up in the market. This is because Indian economy has several structural advantages such as favourable demographics (high share of working age population), low levels of household debt, a large domestic economy with low dependence on exports or global commodities, increasing urbanisation and continued focus on economic reforms. Thus investors should systematically invest in the markets and use market volatilities to their advantage.
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 Mr. RITESH JAIN | In an interview with Anjali Raulgaonkar from Capital Market Publishers, Ritesh Jain, CIO, BNP Paribas Mutual Fundsaid, We have had preference for high growth companies as we believe higher earnings growth reflects in superior price performance eventually. Excerpts: Where do you see the Indian stock market heading in near term? The markets have moved up sharply as Nifty has yielded ~18% returns and midcap index ~26% in CY2017 led by strong domestic macros, improving global outlook, global equities rally, lesser impact of demonetization than expected, strong flows from both Domestic and FII investors and hopes of a second consecutive year of normal monsoons. While corporate earnings growth has been lower in last few years, the stage is set for earnings growth to pick up in the ensuing years. while valuations are higher than Long term average, we believe higher earnings growth in next 2-3 years could provide investment opportunities for long term investors. However, going forward, we believe one has to be selective in identifying the companies /sectors with high growth potential. We believe the government's long-term vision of game changing reforms supported by a slow but steady improvement in economic growth in this calendar year may help build sustainable growth for investors in Indian equities. While the organised sector has been gaining share from unorganised sector, the pace may accelerate post GST implementation which could be positive for the listed companies which largely operate in the organized sector. What is your investment space? We focus on companies across the market cap spectrum. Our investment styleis to buy companies with a long-term investment horizon, which is reflected in our bias towards B2C companies and structural themes like consumption / retail financials in India. we have preference for market leaders or companies gaining market share. If Business fundamentals of any company deteriorates we sell it and invest in other ideas that fit in our philosophy. Any stock specific traits which makes it part of your portfolio? What? We have always focused on companies with superior businesses that have higher and sustainable earnings growth. We have had preference for high growth companies as we believe higher earnings growth reflects in superior price performance eventually. We follow BMV framework of investing. Various investment ideas are filtered through our BMV (Business - Management - Valuations) framework of company selection before adding it to investment universe. The Business fundamentals are analyzed based on different parameters like secular trends, uniqueness of business model, moat of business etc. Management's execution capabilityis key in delivering sustained returns within the realm of industry dynamicsand corporate governance are important parameters. Growth At ReasonablePrice (GARP) is the philosophy that is followed while assessing valuations. What kind of stocks you avoid, why? We avoid companies which don't fit in our investment philosophy of BMV framework. We avoid companies which are cheap but don't have strong business or management. Similarly, we give high importance to management track record and corporate governance. We have preference for companies which generate good cashflows from the business on a regular basis, hence we stay away from companies with inferior/negative cashflows. -Is there any pre-emptive miss you regret (for instance, not investing in a stock or not possessing enough of it)? We always strive to follow our investment process as highlighted earlier, in its true spirit. Hence, we do not regret not owning stocks which have gone up, which do not fit in our investment philosophy. While in case of any stock which we are holding is not performing, we continuously focus on the continuity of moat and growth of the company and would continue to own as long as it fits in our philosophy. What will be your advice to investors? Investors should invest in stocks/funds after assessing their future income and liabilities/cash flow requirements. Investing in equities is akin to participating in a marathon rather than a 100 metre sprint. One has to remain invested keeping the long term in mind as equities tend to be volatile over the short term. We believe India has higher growth opportunities in many bottom up companies/sectors from a longer term perspective as per capita income improves and the favourable demographics plays out . Equities being a long-term asset class with 3-5 years horizon,investors with long term approach could invest in Indian equities.
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 Mr. Sachin Relekar |
In an interview with Anjali Raulgaonkar from Capital Market Publishers, SachinRelekar, fund manager equity at LIC Mutual Fundsaid, our investment strategy is dynamic to take advantage of the ever-changing contours of equity markets.
Excerpts: - Which sectors have been the best gainers and losers in FY17?
The best performing sectors for FY 17 were Industrial metals and Oil & gas. BSE metal index and BSE oil & gas index, appreciated by 57% & 48%, respectively. While healthcare, IT, and telecom gave marginally negative returns. - How to you choose the stocks in your fund portfolio? Kindly elaborate.
As a fund house, we have equity schemes that are categorized as per market capitalization. This determines the investment universe for the portfolios. Our investment philosophy is clearly articulated: - We care about the corporate governance, sustainability and capital efficiency of the business
- We follow bottoms-up investment approach. We do not to bias ourselves on macro, but rather treat macro exposures as risk factors that need to be hedged.
- The Investment process is designed to look through current market perception and focus on the intrinsic value
We follow two investment approaches: growth and value investing. Each of the equity scheme is mapped to either of these two approaches. Important overlap between the two approaches is emphasis on risk management. However, subtle difference in the factors emphasized in stock selection, leads to different portfolios. - What was your investment style and criteria in FY17? And what new strategy you are adopting in FY18?
That said, our investment strategy is dynamic to take advantage of the ever-changing contours of equity markets. - Among mid-caps, large-cap and small-cap which stocks are your favorite and why? Kindly elaborate.
We are positive on businesses oriented towards domestic economy. There can be substantial value (e.g. niche IT) and growth (e.g. auto ancillaries) opportunities in export oriented businesses as well. Among the large caps, we are positive on corporate focused banks as the asset quality issues are likely to show improvement. Similarly,the investment cycle is showing early signs of improvement, leading to interesting opportunities in this space as well. Among mid and small caps, we will look for companies having clear niche and scalable opportunities. However, one should be careful about the liquidity and valuation ofthese businesses. - Where should an investor invest-in funds focusing on large-cap stocks or mid-cap or small-cap and why?
There is very wide variance in performance of these categories in last three years. This has also led to trailing earnings multiple to differ substantially. Trailing multiple is more of indication of growth expectations.
| Price | Curr. EPS | Est. EPS | Curr. PE | Est. PE | BSE Small-Cap | 14434 | 252 | 802 | 57.2 | 18.0 | BSE Mid-Cap | 14097 | 474 | 766 | 29.8 | 18.4 | S&P BSE Largecap | 3582 | 151 | 206 | 23.7 | 17.4 | BSE Sensex | 29621 | 1348 | 1710 | 22.0 | 17.3 |
Source: Bloomberg, price as on March 31, 2017
This suggests that earnings growth expectations in small and mid-cap stocks is substantially higher than that of large cap category, making it potentially riskier. However, investment universe is quite large and there could several under researched ideas. We would like to pay more attention to risk parameters, while choosing small cap ideas. Small and mid-cap investments tends to be volatile as well, so investment horizon should be longer. We more positive on large cap and sizable mid cap stocks for FY 18. Our advice to investors is to match the investment horizon and risk appetite to the scheme selection.
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