Replying to Sarika Kodag and Yash Ved of IIFL, Mr. Saravana Kumar says, “We focus strongly on business fundamentals. Opportunities, scalability of business, and risks, uncertainties, and competition figure in our mind when we pick our investments.”
Do you use technical analysis or fundamental data to pick your investment? How would you describe your methodology?
We follow fundamental driven bottom up method for stock picking. We focus strongly on business fundamentals. Opportunities, scalability of business and risks, uncertainties, and competition are on our mind when we pick our investments. Apart from business fundamentals, as an equity investor, we provide good weightage to quality of management and corporate governance standards of the company. Finally, we value the company based on our understanding of positive and negatives involved.
How are your funds positioned in the current market condition?
Our understanding suggests that economic growth would revive in the next four to six quarters. We do not specifically follow a top-down method of investing; however, our current assumptions have led us to invest fully in various sectors that would benefit disproportionately from such a growth revival. We strictly follow the mandates of various funds run by us and invest accordingly.
Do you plan to sell more stake?
It is the prerogative of our eminent Board to choose appropriate strategic partners from the long-term perspective. I believe they have taken the most appropriate decision in the interest of all the stakeholders. I would not like to comment specifically on further plans on the corporate side.
What are the sectors you are currently bullish and bearish on?
We are selectively positive on the consumer sector, IT, and media and engineering. We think beaten down sectors such as real estate, PSU banking, and metals may provide some cherry-picking opportunities. We are cautious on pharma, private banks, and NBFC, where valuations are high.
What is your AUM? Any plans to increase equity AUM?
As of January 13, 2016, total AUM of SEBI regulated schemes is Rs. 12,457 crore. In addition, we manage Rs.1060 crore of PMS portfolio. We are the fastest growing fund house among the Top 20 Mutual Funds in the country on a yoy basis. We consider this as huge trust imposed by our investors and would strive to stand up to their expectations. Under our able leadership, teams are working towards increasing our AUM further and thus help investors achieve their investment goals. We would focus on growing our equity as well as debt AUM in the future and have chalked out various plans to achieve it.
What is your outlook on Indian and global markets?
I feel Indian markets are getting better backed by good long-term steps taken by the current NDA government and the accommodative policy of the central bank. However, these measures would take 24-36 months to show. Global excess capacity and poor credit-growth figures would also lead to slow progress in recovery. A full-blown manufacturing capex is six to eight quarters away.
The US Fed hike finally happened, but did not affect the Indian market much. Was the issue over-hyped?
The market did over hype, but I was not surprised considering that has been the way markets have behaved in the last few months. Irrespective of positive or negative news, one can gauge how the company fared over a decade, i.e., whether it moved in a single direction or not. Once the initial euphoria is over, you would see the market settling down. For example, the entire market knew that CPI would increase November onwards due to the base effect, but RBI said that it would still meet the CPI target indicated in the policy statement. However, the moment CPI reflected higher numbers in November, experiencing a drastic 10 yr fell before settling down. So, this is a common phenomenon these days when the market reacts sharply to most news.
Coming to the US FED hike, US would have hiked interests anyway as they do not enter into a deflationary phase; if and when the hike happens, it would be gradual considering that the US economy is still in recovery mode. However, once the FED Governor indicated higher probability of a hike in October Policy, markets reacted sharply before correcting by year end. So, this has been the market’s underlying behavior in recent times.
Internationally, the crude oil prices continue to fall. What were the sectors that were affected by the falling crude oil prices?
Falling crude oil affected commodity markets in a big way, especially the metals sector. Since oil is the most tradable commodity, it provides a trigger for the commodity market to move.
Any plans to launch Short Term Debt Fund scheme?
Short Term Fund is one of the segments where we lack a presence. However, we should be launching our Short Term Fund within this year. We are working on product structure and other modifications and once approved by the board, we would be filing it with SEBI. We are expecting to launch it in the first half of the year.
Brief us about your deal with Corporation Bank and GIC Housing Finance?
The deal is work in progress, but once it is official, we will provide the relevant information.
What is your view on interest rates?
Currently, I am bearish on interest rates considering that the supply of Government securities is expected to increase on account of pay commission and other government sponsored programs. Moreover, even US employment and non-farm roll data needs to be tracked. If the data improves it might present a good case for a US rate hike.
What is your advice to the retail investors?
My advice to retail investors is not to look for short-term gains or invest with a trading mindset because the market will always spring a surprise or two. It is important for every investor to understand what type of investment he/she is getting into and whether he/she understands the risks associated. Moreover, the focus should understand the business, integrity of management and promoters, and its financials. This is important because it will help understand whether the company is fundamentally strong to grow and make money for the investors. Another option for retail investors is to take the SIP route in Mutual Funds. That would diversify their risks and long-term investments will fetch good returns.
Any success mantra to be a successful investor?
According to me the best way to make money on your investments is to understand the business and associated risks. You should never tread into uncharted territories. Moreover, successful investment requires doing in-depth research on business, promoters, and global and domestic economy outlook and policy implications of the central bank. All this requires patience and hard work. Nothing can be developed overnight.