Mr. Saravanakumar

In an interview with Capital Market, Saravanakumar, Chief Investment Officer- Equity & Debt at LIC Nomura Mutual Fund said, We believe that the sectors exposed to capital expenditure cycle and consumer discretionary spends are particularly well placed over the next 2-3 years from an investment perspective.

Excerpts:

1. The equity markets are turning volatile? What will the key driving factors for markets going ahead?

Equity markets are facing headwinds due to: (1) uncertainty on developments in the global economy, (2) subdued earnings growth from the companies in the 4QFY15 as the expected cyclical recovery is yet to take root and (3) relatively expensive valuations. The key factors that will be driving the market will be the (1) investment spends by the government, (2) progress in reviving stuck projects and (3) well dispersed and timely monsoons which will allow the RBI to ease its monetary stance.

2. How are the market positioned to face global clues in terms of US rate hike

Markets appear to be reasonably well prepared to face the US rate hike as this development has been front page news since the past two years, which increases the possibility of pricing of the eventuality in the prices. Further, the macroeconomic fundamentals of India have seen meaningful improvement since the 'QE-taper' scare that happened in mid-2013.

3. Which sectors you are considering attractive from investment point of view and why and which sectors you are avoiding and why? What kind of stocks never enters your portfolio?

We believe that the sectors exposed to capital expenditure cycle and consumer discretionary spends are particularly well placed over the next 2-3 years from an investment perspective. We typically invest in companies with a strong track record of corporate governance and sustainable capital efficiency over a period of time.

4. How often do you re-balance your equity allocation?

Turnover ratios in our funds is around ~25% on an annual basis, which is reflected in our focus on bottom-up analysis and steady approach to investing (and conscious strategy of avoiding the noise).

5. What would you like to advice to the investors in the current scenario?

We believe that market volatility is helpful for investors and provides an opportunity to buy into quality businesses at attractive valuations. Retail investors to use this market correction to increase their exposure to mutual funds with a steady investment focus.

6. Kindly share your investment strategy with us. Are you making any changes to your scheme's portfolio as we witness change in market?

Our investment strategy is to focus on individual companies where we think there is sustainable advantage in terms of growth opportunities, capital efficiency and attractive valuations. We then make a check at the aggregate level if we are exposing our portfolio to any specific macroeconomic outcomes and against liquidity risks. Our typical portfolio consists of 35-40 stocks, where we think the risk-reward is favorable from a 2-3 year perspective.

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