What has changed in the fund’s management resulting in its improved performance?
I have been managing the fund since June 2015. That said, if you look at it in terms of overall equity investment team, it has remained the same. So I would not attribute anything differently which we as a team have done.
Our focus area has always been on earnings growth for stocks and how its valuations stack up with its own historical valuations and relative valuations with its peers. This along with sectoral and market outlook goes into stock selection. Careful stock selection has helped the fund’s performance over this volatile period.
What investment approach is adopted by this fund?
We have no bias towards any kind of investment styles. We look for earnings growth in the company that is sustainable over next few years. So earnings growth with a reasonable valuation is the key metric which we look at for stock selection.
Rohit Singhania, Vice President and Fund Manager – DSP BlackRock
What is the composition of the fund and stock selection?
The fund is currently biased towards large caps. Large cap weight is ~72 per cent, mid cap ~ 8.5 per cent, small cap ~10 per cent and micro-cap ~ 6 per cent. Top 20 stocks would account for about 54 per cent of the portfolio. In terms of sectors today we are overweight on industrials, materials and energy.
What kind of stocks and sectors do you avoid?
We ideally tend to avoid businesses where predictability is poor and where our comfort with the management is low.
What bets have worked in the past one year?
Metals, energy, industrials & consumer discretionary sectors have done well for us in the last 12 months and we continue to remain overweight in these.
How do you see the corporate earnings and where the growth will come from?
We expect the profitability improvement to continue in the March quarter in line with the third quarter across most of our companies. Going forward for FY18, from the BSE Sensex point of view, we expect earnings growth of around 17-18 per cent.
What can investors in this fund expect?
As this is an ELSS it enjoys deduction under Section 80C up to Rs 1.5 lakh in a financial year. Due to the three year timeframe, what happens is that generally people who invest for the first time sometimes get scared of the volatility. But our composition of the portfolio is of a good mix of large cap stocks, which are well managed. We take long term calls, keeping in perspective the near term volatility as well.