HDFC AMC’s Roshi Jain Shares Secret Behind Her Top-Managed Funds Beating Benchmarks

HDFC Asset Management Company (AMC) recently conducted a Webinar where senior fund manager, Roshi Jain was roped in to explain the investment decisions taken by two of her managed funds and what let to those schemes outperforming the benchmark.

Read below to find out the excerpts from the Webinar.

How Did Her Two Managed Schemes Fare?

Roshi Jain manages HDFC AMC Focussed 30 Fund and HDFC AMC Tax Saver ELSS Fund. According to data shared by HDFC AMC, the Focussed 30 Fund delivered a 14.2 per cent return in one year against the benchmark return of 0.6 per cent; an outperformance of 13.6 per cent, as of June 30, 2022.

The HDFC AMC Tax Saver ELSS Fund also outperformed its benchmark. According to data shared by HDFC AMC, the fund delivered a return of 8.1 per cent, whereas the benchmark delivered a return of 0.6 per cent over a one-year period. Thus, this fund also outperformed its benchmark by 7.6 per cent, as of June 30, 2022.

Says Jain: “Valuations are ‘somewhat’ reasonable. Hence,market returns could be in line with nominal GDP growth over the medium term. Also, if you see the Focussed 30 Fund’s beta ratio (1.019), it has not deviated much from its benchmark, but still outperformed it.”

How Did Roshi Jain’s Managed Schemes Outperform TheBenchmark?

It was highlighted in the Webinar that the HDFC Focused 30 Fund, despite being restricted to buying just 30 stocks,managed to outperform its benchmark, and that was largely due to the solid back-end research team and Jain’s investment calls. She explains her reasons behind taking such investment calls. 

“There might be an overlap in the stock portfolio of ELSS and Focussed 30 Fund, but going forward, ELSS will be the conservative one, while Focussed 30 will be a little bit aggressive in taking the overweight and underweight sectoral investment calls,” she said.

Diversification: Jain explained that the Focused 30 and Tax Saver (ELSS) are not mandated to invest in a fixed specific market capitalisation of companies. This actually gave her the necessary freedom to curate the portfolios to where she saw the opportunities. But while scouting for opportunities, she was careful about getting too deep in mid- and small-caps,since liquidity was an issue in some of them. Hence, all her calls were risk-adjusted and curated, factoring in the fund’s positional liquidity in that respective stock.

Sector: She highlighted that her funds took into account the sector agnostic approach when picking stocks. This helped her in diversifying her fund’s stocks, while at the same time effectively managing the volatility of returns. She added that “now was the time to buy using the bottoms-up approach and go for specific stock buying.”

Investing Style: She added that her team does not pick up a stock just because it is attractive. She would rather pick up a good stock, provided it is available at a fair valuation. She says she uses a “disciplined approach to investing”, adding that there are a lot of good companies in the market, but their expensive valuations made her stay away from them. She said that she only buys good quality companies, which are available at a reasonable valuation.

She further elaborated on her investing style, saying that when she sees a company, she does not judge it by looking at a few quarterly results, but rather does a thorough research, and selects only those companies which have growth drivers in place for the medium- to long-term. Apart from this, she also sees the company’s management’s ability or expertise to seize opportunities while managing its risks effectively. She also checks for ESG sensitivity and transparency, she said.

She also elaborated on her strategic and valuation approach. She added that the valuation of companies in her portfolio choice is important, because they provide a degree of margin of safety. She said that she does not use traditional tools like price to earnings (P/E) or price to book (P/B), but rather takes a “holistic approach” to stock selection, and all of her stocks are for the long term.

Finally, she went on to share some insightful strategies used by her for HDFC Focussed 30 Fund.

HDFC Focused 30 Fund

Industrial Manufacturing: Jain highlighted that the fund has been kept overweight on industrial manufacturing because of certain reasons. She said that while India may be significantly behind China in manufacturing, this is set to change. Global companies with their “China+1” strategy are looking to India. She shared an infographic too, where it was highlighted, that by 2030, India’s labour force would overtake China.

All of this coupled with other factors made her choose to be overweight in industrial manufacturing, she said. That said, she was taking an indirect exposure via banks and others in infrastructure. She said that there is scope in the infrastructure sector, too, but she prefers to take an indirect exposure when there are direct exposure in industrial manufacturing.

Consumer Goods: Jain said that “we are underweight on consumer goods stocks purely because of valuation terms. There are some good companies in this sector, but the valuations they are commanding does not fit in with our risk-reward structure.”

Banks: Regarding banks, Jain said that she is overweight on them, but underweight on other financial services sector companies. She cited data and said: “If you look at the valuations of private and public sector banks with their 10-year average, then they are currently available at a discount.”

Auto: She said that despite auto being available at a premium over its last 10-year average, she is overweight on this. She said: “There is a scope for diversification within the auto sector – such as two wheelers, tractors, commercial vehicles, passenger vehicles, and others.” She said that it is not like she has bought every single one of them, but she is not overweight on the entire auto sector, but rather on a part of that sector. “For simplification purposes, the classification is done as auto, but it is actually stock specific,” she said.