Could you elaborate on your investment strategy? How have you dealt with bullish, bearish and volatile phases?
The fund invests with bottom up approach to stock picking. The focus is to have core holding of companies with compounding characteristics, strong growth potential and high capital efficiency. Further, at times fund takes tactical bets to benefit from opportunities arising on account of company specific, industry specific or market specific developments. This focus on quality companies and select tactical bets has helped the fund perform across market cycles.
How do you rate the fund’s performance? What is your risk management approach?
The investment strategy for the fund is to run it as a diversified equity fund with bottom up approach to stock picking. The performance of the fund can be primarily attributed to its focus on buying good quality businesses which have compounding characteristics, strong growth potential, good capital efficiency and are run by competent management teams. At the same time, some of the opportunistic exposure to special situations arising out of market, industry or stock specific developments has also positively contributed to the performance of the fund. From the risk management perspective, fund desists from taking large concentrated bets on single stock and that has helped in limiting downsides when the investment argument has not played out.
What are the sectors and stocks you are betting on? Which are the ones you look to avoid?
We believe, going ahead recovery in earnings growth would be a key theme to play. Stocks which will be able to deliver earnings growth and where valuations are reasonable should do well going ahead. We believe that recovery in investment cycle will be led by government capex. Companies which benefit from government push on infrastructure, affordable housing, and rural economy are expected to do well. We are positive on select industrials where capacity utilisations levels are low and balance sheets are good as in such cases earnings can grow disproportionate to their revenue growth on account of operating leverage. We like some of the corporate lenders where we believe asset quality has bottomed out. We are avoiding some of the big ticket consumer names where near term earnings may remain subdued and valuations are expensive.
What is the USP of your scheme?
Tata India Tax Savings fund is a market cap-agnostic, sector-agnostic diversified fund which predominantly invests in companies which have significant potential to grow over a period of time and have compounding characteristics. Although the fund is market cap-agnostic, from risk management perspective, the portfolio is well diversified across companies, industries and market capitalisation. The fund avoids taking large single stock exposures. The objective is to deliver superior risk-adjusted returns to the investors over a longer period of time.
What is your outlook for the next financial year?
As stated above, recovery in earnings growth would be key driver for stock performances. We believe, as markets start looking beyond the transient effects of demonetisation and possible disruptions on account of GST, the outlook for earnings growth looks robust. Further, interest rates have come down significantly in last few quarters. Considering these factors our view continues to remain constructive on equity.
As told to Preeti Kulkarni
Rupesh Patel is Fund Manager, Tata Mutual Fund
