Krishna Sanghvi, Head of Equities, Kotak AMC in an exclusive interview with Harsha Jethmalani of Myiris.com, spoke about performance of his funds, FII inflow, sectors likely to emerge as star performers, etc.
Krishna Sanghvi joined the Kotak group in May 1997 in the Auto Finance subsidiary, Kotak Mahindra Primus, handling credit risk management. Post this; he moved on to Kotak Mahindra Old Mutual Life Insurance as an advisor to the Life insurance subsidiary, managing the debt and equity portfolios. He joined Kotak Mahindra AMC in February 2006 and has been handling equity schemes for Kotak Mutual fund since January 2007. He has over 13 years of experience in the financial markets of which 11 years are at Kotak Mahindra group.
Could you throw some light on the structure of your research team? What according to you goes into good portfolio construction?
We have a buy side research team with 8 research analysts and they cover more than 200 companies stocks across the sectors and across the market capitalization. Each analyst is tracking a sector(s) and stocks there in.
Portfolio construction involves a reasonable mix of sectors and stocks so that it offers diversification to investors and not make them exposed to individual themes / sectors / stocks. Portfolio construction considers the a healthy mix of some aggressive and some defensive stocks so that it generates returns and tries to minimize the downside risks.
How frequently do you churn portfolio for Kotak 30 Fund? The fund is betting on Financials, Energy, and Technology sectors what is outlook for these sectors?
We seek to manage the fund based on our views and outlook on markets and stocks and as such do not have any churn criteria.
We see financials as one of the most promising sectors in terms of growth in credit and earnings. A healthy economy growing at 8% will really provide this industry with the credit growth prospects of 20% and we still have a sizable population that needs to be covered under formal banking channels. Energy is again a promising sector led by de-regulation process announced by government as well as the view that considering global economic outlook (mainly USA & Europe) of a muted growth the crude oil is also likely to remain range bound. Technology is also interesting considering the offshoring opportunities available in western world.
How would you rate the performance of Kotak Opportunities Fund as against its peers? What is the highest individual stock and sector exposure you can take in this fund?
The fund has been performing reasonably well in terms of its track record vis a vis peers as well as the benchmark. The individual stock exposures are capped currently at 5% of the portfolios while sector exposures are capped currently at 25% of fund. We do review the limits based on the sector / stock weights in the underlying benchmark.
What is the general consensus on equity markets? Are money managers still underweight on equities now?
No we do not think money managers are underweight on Indian equities. The equity markets are clearly cheering the growth outlook for the Indian economy. The investor appetite especially of global investors has turned positive on relative growth for India as Indian economy is set to double in next 5-6 years. While valuations may appear a bit premium in near term, we believe that earnings growth will come in to support the valuations.
Market gains this year have been driven mainly by expanding PE multiples for stocks. Are you concerned that the market is too expensive today?
The PE expansion was bound to happen as a reaction to the PE contraction that was seen around 15-18 months back. While markets are getting into above average valuations zone, it is still lower than historic highs recorded on valuation perspective. Also, we think that valuations must be looked into with a forward perspective and on visibility of earnings growth and that`s where a comfort is in place that in the short term valuations may appear a bit premium but we believe that earnings growth will come in to support the valuations. We think the investor`s worry on Indian markets is mainly on account of markets having risen quickly in a reasonably short time.
Foreign fund houses have invested over Rs 710 billion (USD 15.6 billion) so far this year and analysts believe that FII investment in stock markets will cross the last year`s record level. What is your take on this?
We believe that investment flows usually reflect the investor`s faith in sustainability of GDP growth and earnings growth on a relative basis. At the current juncture of global economy. Indian economy - having demonstrated its resilience in past 2 years - ranks among the fastest growing economies in world. This has led to a reasonable investor attention and money; both short term as well as long term. We think this is quite healthy for the Indian economy and markets.
Given that mid and small-cap stocks are more sensitive to interest rates do you anticipate any slowdown in earnings due to increase in interest rate?
We do not anticipate any major impact on profitability due to increase in interest rates at present. The business growth can take care of interest costs. The only risk can be from any major hike in commodity prices that may impact the working capital and interest costs thereon.
What macro factors are you keeping an eye on?
GDP / IIP Growth, Fiscal Deficit, Current account deficit, inflation, interest rates, currency movements.
Source: http://www.myiris.com/shares/company/ceo/showDetailInt.php?filer=20101006153736707&sec=fm
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'I made my money by selling too soon.'
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