nick18_in
MP Guru
Hi all..
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(CAMC) is an asset management company, which offers mutual funds to retail and institutional investors. The company was set up in 1996, as a joint venture with Cazenove Investment Management of the UK. In 2001, the Murugappa Group acquired Cazenove’s stake in the company; today CAMC is a subsidiary of CIFCL. CAMC is known for its prudent philosophy in fund-management. Chola Triple Ace, India’s first AAA-rated mutual fund scheme, has not only retained its rating since inception, but also has a consistent track record of dividend payments. Based in Mumbai, CAMC manages over Rs.1500 crores of assets.
Mr. Tridib Pathak is the Chief Investment Officer for Cholamandalam AMC. Prior to joining Cholamandalam AMC Ltd, he was with Principal Mutual Fund, as Equity Fund Manager. He also has extensive experience as an analyst working with UBS Securities (subsidiary of Union Bank of Switzerland), CARE and IDBI Ltd.
Replying to questions mailed by Manish Tawde of India Infoline, Mr. Tridib Pathak, Chief Investment Officer (CIO) of Cholamandalam AMC said, "Contra strategy works in all markets"
Congratulation for your funds decent performance in 2005. Your equity funds have performed well in the last one-year. Could you give some reasons behind this good performance & also let us know about your investment style?
We follow a focussed and disciplined stock selection process in our investments. We fully respect and understand the interplay between return and risk. So we focus on both return and risk rather than ‘returns’ alone. We are not biased towards any particular investment style – such as ‘growth’ or ‘value’. We would like to provide a consistent and superior risk adjusted performance.
We can’t see many stocks, which falls in the Contra investing category in this skyrocketed stock market. What is the reason behind launching a Contra Fund at this stage?
Well, there are many stocks, which fall into the Contra investing category. In calendar 2005, when markets have given 40% or so of return, out of BSE 500 stocks there were 220 stocks, which underperformed the BSE 500 index. Out of these 220 stocks there were actually 101 stocks, which gave negative returns. Many of these companies’ whose shares have underperformed are actually fundamentally sound companies.
We feel Contra strategy works in all markets – whether bull or bear. As markets move in herds, in all markets there will be stocks, which under perform as the herd ignores them. Most of the times the reasons for this underperformance are short term in nature.
Having said that, we feel that Chola Contra Fund is a relevant product at this stage of the market. Most part of the last 2 1/2 year rally in the market was driven by corporate profit growth. But now the market rally is more driven by valuation rerating i.e P/E rerating. So the easier part of the market rally is over. Everyone agrees that risk levels have risen in the markets. However, at the same time long-term prospects continue to be favourable. During such times it is best to follow a contrarian approach i.e identify fundamentally sound companies which shares have not performed in the recent past.
What would be your investment strategy for your new fund? On which stocks fund will focus - Large Cap, Midcap or Smallcap? Which type of investors can subscribe to this fund?
The investment strategy will be ‘contrarian’ in nature directed to investing in stocks which have underperformed/not performed to their full potential in the recent past. Chola Mutual Fund has in place a disciplined stock selection process to identify ‘contrarian’ stocks which comprises of following steps:
1. Identify universe of stocks, which have underperformed/not-performed relative to the markets.
2. Isolate fundamentally sound stocks from this universe by using stock selection filters – enduring business model, management quality, change in fundamentals and valuation
3. Identify reasons for underperformance/non performance
4. Identify ‘Contra’ stocks
5. Construct diversified Portfolio
So the fund will invest in all stocks – large caps, midcaps as well as small caps.
Who should invest?
Investors looking to diversify their portfolio
New investors looking to invest in equities
Investors looking to reduce their risk level without compromising their return potential
Momentum investors looking to hedge their portfolio
Are you happy with GDP growth & Inflation numbers? What are your future expectations on these two economic indicators?
Yes we should comfortably be able to post GDP growth of around 6.5%+ over the next few years. While inflation could harden a little due to base effect, the overall expectation is that inflation will continue to be benign. Unless there is a major surprise on crude oil front.
Which three sectors could outperform others in the current year? Give some reasons for these 3 sectors performance.
1. IT services – continued growth environment, improving margins ans billing scenario
2. Cement – best play on infrastructure and capex play – cement pricing should continue to get better.
3. Banks – strong credit growth, stable margins.
Among equity funds on which category investors should focus this year viz: Diversified, Sector, Index or ELSS? How much returns investors can expect from these funds in the next one year period?
ELSS for tax purposes and Diversified Funds otherwise for a superior equity exposure. From the broad market it would be reasonable to expect 12-15% returns. Diversified funds and ELSS have always done better than the broad market.
What would be the importance of budget going forward in India? What are your expectations from forthcoming budget?
We do not think that the Budget is that relevant – going by past experiences. As long as the growth and reform momentum continues – we would be happy with any Budget.
On which parameters one should select an equity fund from various schemes and categories?
Following parameters
a. consistency of performance
b. risk adjusted performance
c. portfolio quality
Recently some close ended equity funds have been launched. What would be an advantage of investing in these types of funds?
The biggest advantage is that since these are closed ended funds, they force the investor to remain invested for a longer period – and thus benefit from equities as an asset class which always delivers in the long term.
Message to investors?
There are 3 things retail investors should do.
a. Drop their historical baggage and high-risk sentiments towards investing in equities, as the current market structure and the current Bull Run are different.
b. Moderate their return expectations from equities in a low interest rate scenario. Even a 12-15% return pa from equities is good compared with alternative investment options. Invest for the long term.
c. Do not time markets and invest directly in stocks. Use the Mutual Fund route and systematic investment route.
----------->>>>>>>>
(CAMC) is an asset management company, which offers mutual funds to retail and institutional investors. The company was set up in 1996, as a joint venture with Cazenove Investment Management of the UK. In 2001, the Murugappa Group acquired Cazenove’s stake in the company; today CAMC is a subsidiary of CIFCL. CAMC is known for its prudent philosophy in fund-management. Chola Triple Ace, India’s first AAA-rated mutual fund scheme, has not only retained its rating since inception, but also has a consistent track record of dividend payments. Based in Mumbai, CAMC manages over Rs.1500 crores of assets.
Mr. Tridib Pathak is the Chief Investment Officer for Cholamandalam AMC. Prior to joining Cholamandalam AMC Ltd, he was with Principal Mutual Fund, as Equity Fund Manager. He also has extensive experience as an analyst working with UBS Securities (subsidiary of Union Bank of Switzerland), CARE and IDBI Ltd.
Replying to questions mailed by Manish Tawde of India Infoline, Mr. Tridib Pathak, Chief Investment Officer (CIO) of Cholamandalam AMC said, "Contra strategy works in all markets"
Congratulation for your funds decent performance in 2005. Your equity funds have performed well in the last one-year. Could you give some reasons behind this good performance & also let us know about your investment style?
We follow a focussed and disciplined stock selection process in our investments. We fully respect and understand the interplay between return and risk. So we focus on both return and risk rather than ‘returns’ alone. We are not biased towards any particular investment style – such as ‘growth’ or ‘value’. We would like to provide a consistent and superior risk adjusted performance.
We can’t see many stocks, which falls in the Contra investing category in this skyrocketed stock market. What is the reason behind launching a Contra Fund at this stage?
Well, there are many stocks, which fall into the Contra investing category. In calendar 2005, when markets have given 40% or so of return, out of BSE 500 stocks there were 220 stocks, which underperformed the BSE 500 index. Out of these 220 stocks there were actually 101 stocks, which gave negative returns. Many of these companies’ whose shares have underperformed are actually fundamentally sound companies.
We feel Contra strategy works in all markets – whether bull or bear. As markets move in herds, in all markets there will be stocks, which under perform as the herd ignores them. Most of the times the reasons for this underperformance are short term in nature.
Having said that, we feel that Chola Contra Fund is a relevant product at this stage of the market. Most part of the last 2 1/2 year rally in the market was driven by corporate profit growth. But now the market rally is more driven by valuation rerating i.e P/E rerating. So the easier part of the market rally is over. Everyone agrees that risk levels have risen in the markets. However, at the same time long-term prospects continue to be favourable. During such times it is best to follow a contrarian approach i.e identify fundamentally sound companies which shares have not performed in the recent past.
What would be your investment strategy for your new fund? On which stocks fund will focus - Large Cap, Midcap or Smallcap? Which type of investors can subscribe to this fund?
The investment strategy will be ‘contrarian’ in nature directed to investing in stocks which have underperformed/not performed to their full potential in the recent past. Chola Mutual Fund has in place a disciplined stock selection process to identify ‘contrarian’ stocks which comprises of following steps:
1. Identify universe of stocks, which have underperformed/not-performed relative to the markets.
2. Isolate fundamentally sound stocks from this universe by using stock selection filters – enduring business model, management quality, change in fundamentals and valuation
3. Identify reasons for underperformance/non performance
4. Identify ‘Contra’ stocks
5. Construct diversified Portfolio
So the fund will invest in all stocks – large caps, midcaps as well as small caps.
Who should invest?
Investors looking to diversify their portfolio
New investors looking to invest in equities
Investors looking to reduce their risk level without compromising their return potential
Momentum investors looking to hedge their portfolio
Are you happy with GDP growth & Inflation numbers? What are your future expectations on these two economic indicators?
Yes we should comfortably be able to post GDP growth of around 6.5%+ over the next few years. While inflation could harden a little due to base effect, the overall expectation is that inflation will continue to be benign. Unless there is a major surprise on crude oil front.
Which three sectors could outperform others in the current year? Give some reasons for these 3 sectors performance.
1. IT services – continued growth environment, improving margins ans billing scenario
2. Cement – best play on infrastructure and capex play – cement pricing should continue to get better.
3. Banks – strong credit growth, stable margins.
Among equity funds on which category investors should focus this year viz: Diversified, Sector, Index or ELSS? How much returns investors can expect from these funds in the next one year period?
ELSS for tax purposes and Diversified Funds otherwise for a superior equity exposure. From the broad market it would be reasonable to expect 12-15% returns. Diversified funds and ELSS have always done better than the broad market.
What would be the importance of budget going forward in India? What are your expectations from forthcoming budget?
We do not think that the Budget is that relevant – going by past experiences. As long as the growth and reform momentum continues – we would be happy with any Budget.
On which parameters one should select an equity fund from various schemes and categories?
Following parameters
a. consistency of performance
b. risk adjusted performance
c. portfolio quality
Recently some close ended equity funds have been launched. What would be an advantage of investing in these types of funds?
The biggest advantage is that since these are closed ended funds, they force the investor to remain invested for a longer period – and thus benefit from equities as an asset class which always delivers in the long term.
Message to investors?
There are 3 things retail investors should do.
a. Drop their historical baggage and high-risk sentiments towards investing in equities, as the current market structure and the current Bull Run are different.
b. Moderate their return expectations from equities in a low interest rate scenario. Even a 12-15% return pa from equities is good compared with alternative investment options. Invest for the long term.
c. Do not time markets and invest directly in stocks. Use the Mutual Fund route and systematic investment route.
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