India's top PMS fund managers have consistently outperformed the market. Their secret? Among other strategies, it involves a combination of analysing fundamentals, stock selection, and strategic risk control, all aimed at maximising returns.
PMS Bazaar conducted its second edition of the Dubai Alternative Investment Summit (DAIS) on February 17, 2024. As part of this event, the company invited various industry experts to share their insights on the Indian alternative industry.
The topic of the panel
discussion was: The Secret of Superior Returns from India's Top Performing
Portfolio Managers
Panel experts were:
Anirudh Garg, Fund Manager,
Invasset; Bhavik Thakkar, CEO, Abans Investment Managers; Bhavin Shah, Founder
& CIO, Sameeksha Capital; and Vipul Prasad, Founder & CEO of Magadh
Capital.
Moderator: Krishnan
Ramachandran, CEO of Barjeel Geojit Financial Services.
Krishnan Ramachandran started by
highlighting how India has transformed in the last 10 years and how key growth
and macroeconomic metrics were looking up. He added that money managers have
delivered well over the past three to five years, and wanted to know how the
markets should be approached in the next five years.
Vipul Prasad said the focus would
continue to be on arriving at the fair value of businesses, understanding key
business variables and forecasting the cashflows that companies can generate.
He added that assigning probabilities to scenarios that could play out was
another key step. Using behavioural finance reduces biases and mistakes in
stock selection, he noted.
What helps with the investment
opportunities?
Bhavin Shah said the economic
growth in the country over the long term would throw up many investment
opportunities. Even in a depressed market and economic conditions in the early
part of the previous decades, there were attractive pockets, he observed.
Tracing the gyrating, but
upward-moving markets from 2020, Bhavik Thakkar said that’s when a fund
manager’s asset-picking skill would come to the fore. He went on to highlight
the advantages of a market-neutral arbitrage strategy and also momentum
investing.
Anirudh Garg was then asked about
balancing growth and value factors in investing. He said that a multi-factor
approach combining value, growth, quality and so on would help depending on the
market conditions – bearish, bullish or sideways. After good returns are
generated over a period of time, preservation is important and cash calls can
be taken to ensure capital protection in overexuberant markets.
Moving to the mid and small-cap
story, Prasad then went on to state that the index was not representative of
the action in individual stocks in terms of valuations, growth potential and so
on. He stressed against relying solely on price multiples and emphasised
careful earnings growth forecasts.
Highlighting the need for being
prudent in stock selection, Shah emphasised the importance of using both
qualitative and quantitative factors.
Thakkar then explained how
structured products were actually ‘predictable passives.’ Linking the returns
of a market-linked debenture innovatively to an index such as the Nifty,
particularly at depressed market levels, gives a certain degree of certainty to
returns. This could be done with g-secs as well, he said.
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