Could you elaborate on your investment strategy? How have you dealt with bullish, bearish and volatile phases?
Harsha Upadhaya, CIO - Equities, Kotak Mahindra AMC shares what goes into managing Kotak Tax Saver
Could you elaborate on your investment strategy? How have you dealt with bullish, bearish and volatile phases?
Overall investment strategy in Kotak Tax Saver remains similar to what we have adopted in our other equity schemes like focussing on bottom-up investment ideas and Growth at Reasonable Price (GARP) approach. Typically, we look for compounding characteristics of earnings growth at reasonable valuations, and build portfolio around that strategy.
We do not change our investment approach in different phases of the market. Cash level in the fund is generally limited to not more than 7.5% of the corpus. We rather use sector allocation and stock selection to deal with the nature of the market and volatility.
What is the USP of your scheme?
Kotak Tax Saver is an equity fund based on multi-cap approach. While the large cap allocation provides stability, the potential kicker in returns is expected from mid- and small-cap exposure. With relatively low portfolio churn, the investment focus has always been long term.
What are the sectors and stocks you are betting on? Which are the ones you look to avoid?
The key overweight sectors in the portfolio are – Cement, Capital Goods and Oil & Gas. Government’s continued focus on affordable housing and infrastructure creation should aid demand in Cement and Capital Goods. The underweight sectors are – IT and Pharma. Apart from already weak fundamentals, these sectors are prone to possible adverse change in US policies. Telecom sector continues to see headwinds, wherein the portfolio has no exposure. Currently, large cap allocation in the portfolio is about 65 per cent.
What is your outlook for the next financial year?
We expect FY18 to be a year of recovery in corporate earnings. We anticipate 14-15 per cent yoy growth in earnings during FY18. In our opinion, Indian equity market should broadly move in line with expected earnings growth over the next financial year.
The fund has largely beaten the benchmark as well as category average across periods. Could you elaborate on your approach that has resulted in this performance?
All along we have maintained long term focus in our investment approach. We have invested in businesses that are scalable in nature, where capital efficiency is high and that have reasonable competitive edge in their respective areas of business. We have always placed a lot of importance to management quality and corporate governance track record. We have avoided companies that have high level of event or policy or regulatory risk. The overall performance can be attributed equally to both sector allocation and stock selection.