Investors need to look for companies that are ready to face the future, according to two top executives of Kotak Asset Management Co.
"Innovators, disruptors will do well. They are the future," Nilesh Shah, managing director of Kotak Mahindra AMC, said in The Mutual Fund Show. "Essentially, you should future proof your portfolio by investing in companies who are ready to face the future."
According to Harsha Upadhyaya, chief investment officer-equity and president at the AMC, manufacturing sector to be a major growth driver over the next five to seven years due to the due to the policy push by the government. And he also expects earnings momentum to sustain in the near term.
The asset manager's Kotak Bluechip Fund completes 25 years. The scheme has offered a SIP return of 16.36% CAGR in 25 years.
"We are rock-solid in terms of our principles," said Shah. "We are are growth-at-reasonable-price investors."
Upadhyaya said the fund stuck to its "investment discipline". "We have always invested in established companies, as we assess companies on competitive advantage."
A reason why both of them are not worried about the market regulator's caution on the froth in small- and mid-cap schemes.
"Nothing has changed in the fund constitution. We are investing more than 80% in the large cap stocks. The rest of 20% is available to invest in mid and small cap," Upadhyaya said. "Within the large-cap space, it is equally split between the Nifty 50 and Nifty Junior."
"We have a tilt towards domestic businesses now," he said. "As the size grows, as the market matures, it becomes challenging to create the same alpha we made a decade ago."
Watch the full show here:
Edited Excerpts From The Interview:
Where do you think the next set of big opportunities come in, because like Nilesh bhai said—one, the companies need to invest for the future. So some of your top holdings for example are the traditional banks, may be IT services, oil energy upstream company, etc.
Where do you see in the remaining 20% opportunities wherein companies have the highest chance of, may be being small currently relatively, but having a fighting chance of becoming larger over the course of the next seven years?
Harsha Upadhyaya: See, if you look back, India has seen cycles of 5-8 years in businesses as well as in stock markets, where a particular theme does well, from a business perspective and also gets rerated over a period of time.
From the mid-90s to may be 2000-2001, it was the IT outsourcing theme, which did well in terms of business as well as in terms of how stock market reacted to it. Then, there was a period where construction, infrastructure-led activities really drove the growth and also the stock market really kind of rerated the entire basket. Then we had two periods where consumption-oriented theme as well as banking were the next two big themes.
Now, we believe that over the next 5-7 years manufacturing—all gamuts of manufacturing—will be the theme. I think there is really a wonderful space, where India can occupy a part of the global trade. There are geopolitical issues, which are favouring us. And there is capability-building that's happening which will also allow us to really go and compete against many of the competitors in the world. And definitely, I think, the policy push is also towards making sure that India comes out as a manufacturing hub.
So there will be several plays within the manufacturing space, which will give that kind of attractive growth over the next few years in our mind. And that will be represented both in the large-cap segment (in the 80%) as well as in the 20%, outside the large cap.
Nilesh bhai, what is the one thing that as a CEO of this firm and as somebody who's doing countless of these seminars, meeting investors, the one message that you want to give to mutual fund investors currently, something that you believe they should be doing but are not doing?
I would reckon, one of the easy answers is not staying invested for long term. Is there something else as well?
Nilesh Shah: In a slightly lighter vein, in our culture, we have been told that money is not everything in life. Money doesn't matter. Paiso hath no mel chhe.
My recommendation is what Warren Buffett mentioned. Money is not everything in life, money is not important. But make sure that you have made enough money before you make such statement.
Please, please, please protect your financial security. For our parents, we were the retirement solution. Sar utthake jeeyo. Secure your financial freedom. And if you are faithful to that, mutual fund will be your top priority. Then by definition, you will become regular investor, long-term investor, and also a disciplined investor.
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