Four fund managers' view on how equity markets are likely to take in coming months

They are like players of the Indian cricket team. A good show earns kudos while a poor one brings brickbats. That they manage public money makes them even more accountable. Meet some of the country's leading fund managers who have been managing your money convincingly, both during rallies and in downturns of the equity markets. In candid conversations with ET , top executives of the mutual fund industry share not only their investment strategies and biggest challenges, but also some of their best and not-so-good investment decisions, besides giving their view on the direction equity markets are likely to take in the coming months.

Sandeep Kothari, Fund Manager, Fidelity

Worldwide Investment

1) What makes you stay back in your current organisation?

Fidelity is a good company with a good investment culture. Also, as an asset manager I believe that one needs to build a track record in managing people's money and to build trust. You can not hop around jobs to do that.

2) What is your philosophy for equity investing?

There is no growth or value sort of philosophy per se. I believe one needs to look at businesses, scalability of business and pay the right value for it. The idea is to identify good businesses and grow with those businesses. 

3) What triggers your investment decision?

I think paying the right price is very important. However, defining the right price is very subjective and influenced by a lot of macroeconomic factors.

4) Your biggest challenge as an equity fund manager.

Not losing out on focus if schemes underperform and not getting carried away if they do well.

5) Your best investment decision.

Did not get carried way by the infrastructure boom in 2007 though the decision had begun to hurt the performance of the schemes. Sticking to the conviction of not investing in these companies was very challenging and difficult, but eventually it paid off well.

6) Investment decision you regret.

We exited a couple of stocks at the lowest prices ever hit by that counter and lost money since we had bought them pretty expensive. While we did not have significant exposure, we do regret not having done enough research before taking the exit call.

7) Investment ideas for the coming months.

We expect the banking and financial cycle to turn around this year and if that happens then the capital investment cycle would also increase.

8) Do you invest in your own schemes?

I have invested in all three of my schemes, Equity, India Growth and Tax Advantage though SIPs. In fact, a large part of my equity investments is in my own funds.

9) Your take on Indian equity markets.

Markets are volatile and we expect volatility to continue. But we do believe in cyclical recovery if government starts moving on the policy. But if reforms do not happen, sentiments may turn back equally quickly.

Apoorva Shah, Executive VP & Fund Manager, DSP Blackrock Asset Management

1) What makes you stay back in your current organisation?

I respect the core values of DSP that are honesty, integrity and an open culture. This organisation has allowed me to work in different capacities and graduate from sales to fund management.

2) What is your philosophy for equity investing?

I don't have a theory on how the market should behave but I am flexible in my approach. I accept the way in which it behaves and adapt myself to it.

3) What triggers your investment decision?

Stock picking, especially in the mid caps, is on the basis of size of opportunity, scalability, pricing power and management quality in terms of their ability to execute and track record.

4) Your biggest challenge as an equity fund manager.

To read the changing markets from time to time, and to meet investor expectations.

5) Your best investment decision.

Going extremely defensive in 2008 with overweight positions in consumer staples, pharma and IT despite they being expensive. We avoided financials and cyclical stocks then.

6) Investment decision you regret.

Couldn't aggressively change the defensive character of the portfolios in 2009. Should have embraced the financial sector in March 2009. Got apprehensive about the potential bankruptcy in the system and avoided financials.

7) Investment ideas for the coming months.

We have remained defensive for a major part in 2011, but are looking forward to cut down on defensive bets. Looking to invest in certain beaten down and cyclical counters like financials, capital goods, and infrastructure.

8) Do you invest in your own schemes?

I have currently invested in DSP Balanced fund and the MIP. I have a lump sum investment in both these schemes.

9) Your take on Indian equity markets.

We have had high quality stocks outperform till last year and there was a high-risk aversion. Now there is a love for risk that has come again. Valuation gap between quality stocks and beaten down ones has expanded substantially. Quality stocks are very expensive. Need to shift the portfolios based on a value approach, on the margin.

Anand Radhakrishnan, Sr VP & Portfolio Manager - Equity, Franklin Templeton Asset Management

1) What makes you stay back in your current organisation?

The only business that we do in Franklin Templeton is asset management and as an investment management professional I like to work for an organisation where the heart and the soul belongs to investment management. It is one of the very few organisations to have emerged as the benchmark for some of the best industry practices globally.

2) What is your philosophy for equity investing?

Investing in businesses that can withstand cycles and deliver good returns in both good and bad times.

3) What triggers your investment decision?

It is essentially bottom-up based GARP approach, but we also take value based contrarian calls.

4) Your biggest challenge as an equity fund manager.

To identify long-term winning ideas in the market.

5) Your best investment decision.

Investing in some of the large-cap stocks where we had high conviction like HDFC Bank, Bharti Airtel, Lupin, Kotak Bank and Idea. Investing in Cummins in the industrial segment turned out to be a winning idea for us.

6) Investment decision you regret.

Not exiting some of the extremely high-valued infrastructure stocks in 2007. One costly decision in 2011 was to sell consumer staples too early on valuation concerns.

7) Investment ideas for the coming months.

With interest rates very low globally, it is not remunerative investing in bonds, while dividends in several equities are higher.There was a case of undervaluation of equities. Markets is on a corrective course where the undervaluation of equities will reduce.

8) Do you invest in your own schemes?

Most of my equity investments are in our schemes. So if my schemes do well even we do well.

9) Your take on Indian equity markets.

Hopefully, a number of local issues will get solved once the elections are over. Hence 2012 will be a better year compared to 2011. We are cautiously reacting to these changes, while waiting for confirmations. We are not betting on a big recovery in 2012. We believe that some more of what we have seen is required to enable bigger bets on pro-cyclical stocks.

Kenneth Andrade

Head - Investments, IDFC Asset Management

1) What makes you stay back in your current organisation?

IDFC has given me independence and freedom of thought to implement what I wanted to. I have been associated with the organisation when it just started off in equities and now I have taken it up as a challenge to scale it up.

2) What is your philosophy for equity investing?

I look for great start-ups and for great people who can start organisations. Then once the business hits a certain inflexion point, you need to see if it has enough bandwidth to scale up.

3) What triggers your investment decision?

I like companies that go for market share, especially in down cycles.

4) Your biggest challenge as an equity fund manager.

Finding the right scale of investment without diluting the return profile of the portfolio.

5) Your best investment decision.

Not having infrastructure stocks in the portfolio in 2008 and banking and financials in 2011. Also, an early participation in the consumption cycle in early 2009 helped.

6) Investment decision you regret.

We got some of our exit strategies wrong, like textile, sugar and solvent extraction in the mid of 2010. Our exit strategies in many businesses have not been the best.

7) Investment ideas for the coming months.

We are kicked about the NBFC space. While the entire banking system in the last decade extended their balance sheets to infrastructure, their lending to the retail segment has not been impressive. NBFCs have shown a significant growth in retail lending which we like.

8) Do you invest in your own schemes?

There is too much off a compliance issue. So I refrain from investing in my own schemes. Currently, my largest investment is IDFC itself. I do not invest in mutual funds because of regulatory problems.

9) Your take on Indian equity markets.

In the current decade, corporate & bank balance sheets and the fiscal position are in mess. The de-leveraged part of the economy is the customer. So my sense is if the interest rates were to soften, the first thing to take off will not be capital goods or infrastructure but the car sales and mortgages.

Source: http://articles.economictimes.indiatimes.com/2012-02-13/news/31055165_1_fund-managers-equity-markets-investment-strategies/2