The fund managers insist that a growth-bias will deliver superior outcomes in a market like ours. While multiples for this basket have been pegged back amid recent market volatility, they are adamant that business models are not broken and remain on a strong footing to weather turbulences. Yet, even as many are comfortable sitting on the ‘growth’ side of the fence, they acknowledge the need to be responsive to changing market realities and have made subtle changes to give their funds an edge.
Rajeev Thakkar
AGE: 49 YEARS
EDUCATION
CA, CFA Charter Holder, Grad ICWA
EXPERIENCE
21 years
PROFILE
Rajeev Thakkar’s fund Parag Parikh Flexi Cap has seen its share of ups and downs. It benefited in the aftermath of pandemic through its foreign equity-led tech exposure. But as the pandemic’s effects waned, much of these gains got reversed. Limits on overseas investments pushed the fund towards recalibrating its foreign allocation. It regained its strength towards the end of the year, riding on value bets. Throughout this period, Thakkar has stuck to his convictions. He insists many of the issues we tend to worry about in the short term don’t matter in the long run. What matters is the business quality, valuations and long term structural trends. He uses cash strategically, but doesn’t feel compelled to buy unless opportunities arise.QUICK TAKE
My reading of the market
Given the rising interest rate scenario and tightening liquidity, there will be intense focus on profitability and capital efficiency. Valuations will be under scrutiny. Investors will have to contend with stock specific returns dominating their portfolio returns rather than depending on overall buoyancy in the market.
How my fund is positioned
We remain invested in companies that are well governed, have attractive business modes and valuations. We have about 15% in cash equivalents which we can deploy as and when opportunities arise.
Aniruddha Naha
AGE: 47 YEARS
EDUCATION
Masters in Finance & Control
EXPERIENCE
22 years
PROFILE
Aniruddha Naha retains his preference for high growth businesses in PGIM India Flexi Cap. Yet he acknowledges that ‘growth at a reasonable price’ is a relative concept. He emphasises on adherence to price-to-earnings growth, but has moved away from its theoretical application. In recent years, he has tinkered with PEG thresholds for both buy and sell calls to give the fund more latitude in different market conditions. Focus on operating cash flows is another pillar in his framework for identifying good businesses. He shuns companies with debt on the balance sheet and corporate governance issues. He stayed away from IPOs of companies that don’t meet his balance sheet and cash flow hygiene checks. Emphasis on downside protection has helped the fund achieve superior risk-adjusted outcomes.
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My reading of the market
The near term could be challenging in terms of interest rates, but on a bottom up basis, growth opportunities are visible over the next two to three years. India is reasonably isolated from the impacts of a recession, high debt and offer good earnings growth in medium to long term.
How my fund is positioned
Large cap exposure is 57% as of January 2023 while rest is in mid and small caps. The fund has reasonable exposure to capital goods and engineering, financials and consumers, while we are cautious on IT and commodities.
Shridatta Bhandwaldar
AGE: 42 YEARS
EDUCATION
BE (Mechanical), MMS (Finance)
EXPERIENCE
16 years
PROFILE
Akin to his stance in the large cap arena, Shridatta Bhandwaldar retains a tilt towards growth businesses for Canara Robeco Flexi Cap, Canara Robeco Emerging Equities and Canara Robeco Equity Tax Saver. Bulk of the portfolios are parked in steady compunding businesses with high earnings visibility and competitive advantages. A small portion is deployed in alpha generators in the form of turnaround bets, new listings or emerging themes. Once a company becomes part of the investment universe owing to its earnings quality, Bhandwaldar does not distinguish between growth and value. He insists that value should only be viewed from the prism of incremental earnings growth and capital efficiency. When the context changes, so does the perception of value. This is why he is not averse to taking a hit abstaining from businesses during phases when valuation multiples get re-rated only for near term earnings growth.
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Reading of the market
Flexi cap funds are expected to do well in 2022-23/2023-24 given their ability to move across market caps and their large cap orientation.
How my fund is positioned
The fund is overweight on domestic cyclicals like Financials, Consumer Discretionary, Industrials. Lately we have started covering our underweight in IT.
Shreyash Devalkar
AGE: 43 YEARS
EDUCATION
Bachelor in Chemical Engineering & MMS
EXPERIENCE
17 years
PROFILE
Shreyash Devalkar brings his quality and growthled focus to Axis Flexi Cap. He specifically scours the investible universe for companies at inflection points—market share gains due to competitive advantages, sunrise industry, industry consolidation, improved capital efficiency or regulatory changes. Typically leaning heavily on large caps coupled with a sizeable presence in mid caps, he started hiking exposure to small caps towards the end of 2021. Despite running a reasonably diversified portfolio, he retains outsized positions in the top few large cap bets, while running modest positions in mid and small caps. His tactical use of cash is most visible in Axis Flexi Cap, having nearly 30% cash at the start of 2018, pared back steadily to less than 5% in early 2021 and hiked again to more than 10% by 2022-end.
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My reading of the market
After the sharp rally in the past three years, the valuation differential among Large – Mid – Small and B2B – B2C has got broadly bridged. Under these conditions the focus goes back to bottom-up ideas and earnings growth, irrespective of sectoral / market cap orientation. Accordingly, consolidation phase in the market is already underway for almost last 1.5 years.
How my fund is positioned
Axis Flexicap Fund is overweight on financial services along with consumption oriented industries and the healthcare segment.
Neelesh Surana
AGE: 53 YEARS
EDUCATION
Engineering graduate with MBA in Finance
EXPERIENCE
27 years
PROFILE
Neelesh Surana’s enviable track record of consistent outperformance saw a blip last year. A shift in interest rate regime and re-rating in value stocks were external events that punished his growth-leaning portfolios. Company-specific issues also haunted some bets. Yet, these phases offer a chance to reset and stress-test processes, observes Surana. The importance of a portfolio construct comes to the fore, with healthy diversification and no sector or style tilt helping the funds navigate tough conditions. Surana insists this allows a platform to finetune internal processes, particularly now that fund size has grown to a level where cost of mistakes is high. He intends to persist with the same rigour that helped delivered superior outcomes over the long term, marked with clear emphasis on margin of safety.
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Reading of the market
Indian economy is well positioned to handle change in regime globally to high interest rates. India has strong, sustainable and secular drivers to grow, and thus our view on equities remain constructive. Investors should follow a well-crafted allocation towards equities, and remain committed for a few decades.
Fund positioning
Core portfolio invested in high quality growth businesses, which have become lot more reasonable. There is lot of value within growth-oriented businesses.
