What were the learnings from the first season of Smart Portfolios Season and strategy?
More than reaching the destination, the journey of the last one year with Smart Portfolios was more satisfying. Even though the portfolio was a notional one, the reactions almost made us believe that we were literally managing someone's money.
During the initial unsteady months we adopted a cautious approach of remaining in cash. Through the months we planned not just our entry strategy but also the exit strategy with utmost care. Sure, we may have missed the bottom while buying and top while selling, but no one can claim to be able to do that either. By the end of the season we were fully invested. With the tide turning in our favour, we did take a few aggressive mid-cap bets, which further boosted our performance.
What would be your contribution to Smart Portfolios Season II?
The second season comes with new fund managers who will give investors a flavour of their strategies. Investors often wish to unravel the mind of a fund manager, which is good. But investors need to realise that fund managers cannot be mimicked to make gains. Give someone a tip and the person will make money one day. Teach the art of investing and the person can make enough for a lifetime. My endeavour will be to help investors realise the latter.
How do explain the concept of equity markets to the lay investor?
The stock market is the perfect meeting place for buyers and sellers for asset exchange; not to forget the intermediaries that facilitate such meeting. An active trading platform facilitates smooth entry and exit, making it among the most liquid assets. The stock market is a boon to companies that wish to raise money for future growth. At the same time, it provides investors an opportunity to be part of that growth by owning a fraction of the company. It is the best asset class, providing the opportunity to generate substantial wealth over the long term. In the short term the stock market appears like a roulette game but in the long term it's like a weighing machine.
The markets have doubled since March. What are your expectations?
The fiscal supply around is clearly the result of the convalescence dose by governments. The liquidity notwithstanding, market players have chosen to discount some concerns - likely monetary control measures, the bleak fiscal deficit situation and best case valuations at fair value (17x FY11E). While any major upside to the Nifty may be difficult, the excess liquidity leaves little room for any severe downslide as well. We believe money will move out from overbought sectors to ones that have not participated heavily in the rally and non-index stocks will outperform their larger peers.
You have invested around 90 per cent of your funds and exited from OMCs?
In line with the above mentioned strategy, I have chosen to remain 85-90 per cent invested. Buying into OMCs was ahead of expectations of subsidy bonds to be issued for 2009. We booked profits recently and will monitor closely to re-enter at an opportune time again.
What are the stocks or sector you would focus on going forward?
Ours approach will primarily be bottom-up. But sector wise, we like infrastructure, which will be the biggest beneficiary of government contracts. While the fiscal situation may not permit big spends, our channel checks tell us that the PPP route will be adopted.
Telecom is another area witnessing stable demand with subscriber additions are going steady. Once the Bharti - MTN is completed, this sector will get re-rated.
We are equally bullish on the auto industry fortunes. It did well during the downturn and has held up strong even on bad monsoons. However, valuations seem rich. A prudent strategy would be to zero-in on some auto-ancillaries players focused on the domestic market.