Over the past 18 months, fund managers faced two structural disruptions — demonetisation and GST — which posed a challenge in selecting companies. Besides, while the micros improved, a few key macro indicators — crude oil and interest rates — showed signs of deterioration. A few largecap and midcap funds sailed through these challenges and delivered more than 15 per cent returns. Buying into financials, consumption, consumer discretionary and playing themes like unorganised to organised and spotting good investment ideas in IPOs helped these fund managers create alpha.
INVESCO INDIA GROWTH OPPORTUNITIES FUND
Fund Manager: Amit Ganatra and Taher Badshah
Assets Under Management: ?484 crore
Top Holdings: HDFC bank, Reliance and Indusind Bank
Return: 21.31 per cent
A mix of large- and mid-cap stocks, style neutral, with 75 per cent of its portfolio allocation to growth, and 25 per cent to value, helped the fund emerge a winner post demonetisation. Buying growth at a reasonable price and rarely buying a high price stock have helped the fund come up with stellar returns. Buying IT as a contra play with stocks like HCL Tech, Cyient and Infosys ahead of others along with participation in IPOs such as Mishra Dhatu, Shankara Building and Apex Frozen helped deliver higher returns.
AXIS EQUITY FUND
Fund Manager: Shreyash Devalkar
Assets Under Management: ?1,989 crore
Top Holdings: HDFC Bank, Kotak Mahindra Bank, Maruti
Return: 20.42 per cent
A stickler to quality and growth, the fund manager picks up companies with high ROE, superior quality cash flows and corporate governance. Post demonetisation, the fund manager was quick to spot money coming into the formal banking system and went overweight on banks and NBFCs, like HDFC Bank and Bajaj Finance. This along with being overweight on consumption and automobiles, participation in IPOs like Avenue Supermarts and Endurance Technologies helped the fund deliver superior returns. The fund avoided value traps like PSU banks, pharmaceuticals and information technology, which helped it stay ahead of its peers.
ICICI PRUDENTIAL FOCUSED BLUECHIP EQUITY FUND
Fund managers: S Naren, Rajat Chandak
Assets Under Management: ?17,142 crore
Top Holdings: ICICI Bank, HDFC Bank, Infosys
Return: 16.64 per cent
Post the demonetisation announcement, a key mantra which the scheme’s managers followed was sticking to the leader in a given sector. This strategy worked especially well when normalcy returned. The fund managers focused on buying companies in the consumption space, especially discretionary, such as Maruti, TVS Motor, Motherson Sumi and Bajaj Finserv. The fund managers already owned these in their portfolio. Post demonetisation, they enhanced exposure to these stocks. The fund also made profitable gains in IPOs such as Avenue Supermarts.
KOTAK SELECT FOCUS FUND
Fund Manager: Harsha Upadhyaya
Assets Under Management:?19,228 crore
Top Holdings: HDFC Bank, L&T, RIL
Returns: 15.33 per cent
One of the key themes which helped the fund manager sail through demonetisation times is revival in the rural economy. Keeping this in mind, he bought in FMCG and auto companies. Besides rural recovery, he also focused on the consumer discretionary theme. Some of these companies which he bought in due to cheap valuations include Britannia, Godrej Consumer Products, Bata, Mahindra & Mahindra and Hero MotoCorp. To insulate the scheme’s portfolio from any downfall, the fund manager was prompt enough to stay away from stocks which have been facing adverse business situation.
RELIANCE LARGE CAP FUND
Fund manager: Sailesh Raj Bhan
Assets Under Management: ?9,833 crore
Top Holdings: SBI, HDFC Bank, ITC
Returns: 16.37 per cent
After the announcement of demonetisation, a large number of quality companies were available 30-40% cheaper than what they were trading before. This fall in premium in valuation of quality companies attracted high interest from fund managers. The fund manager focused on companies which could generate aggressive growth largely because of their size and market share. These were Eicher Motors, HDFC Bank, Tata Steel, Mahindra & Mahindra, and Larsen & Toubro. He stayed away from defensives and enhanced exposure to companies which captured the consumer discretionary theme quite well. These include Bajaj Finance and Chola Finance.