With five continuous quarters of underperformance, its start appeared doomed. It changed direction from March 2009 but the road has not been smooth.
After Husain took over in June 2009, he revamped the portfolio based on the premise that domestic recovery would be stronger than the global one. His move paid off. Come 2010, he failed to impress. Early that year he began to pare down exposure to stocks which he felt were overvalued. Unfortunately, his timing was less than perfect. “The market initially did stumble but later in the year started appreciating. We stuck by our fundamental research indicators and did not change our portfolio stance. Hence, the result was an underperformance,” says Husain.
Husain tends to take a contrarian stance. Currently, Financial Services is the top sector amongst most funds in this category but this fund’s allocation is just around 7 per cent. Again, due to valuations and headwinds in terms of regulatory tightening, especially in terms of provisioning norms, led to his stance in Banking. “We now feel valuations are reasonable and probably factor in most of the negatives and so are looking at the sector once again,” he says.
Last year, allocation to Auto averaged around 21 per cent during the first six months of the years (category average: 5%) while the fund remained underweight on FMCG and Healthcare. In terms of sector bets and individual stock picks, Husain certainly does not follow the herd. Ever since he took over, popular stocks like Reliance Industries, ICICI Bank and State Bank of India do not feature here.
From being categorized as an ‘Equity: Large & Mid Cap’ fund, in September 2011, it moved to the ‘Equity: Multi Cap’ one. Its allocation to small caps has not exceeded 15 per cent in its entire history.
Over the last few quarters, this fund has fallen less than its peers. It’s not among the most consistent ones in the category but by showing periodic bouts of performance and restraining its fall in downturns, it does reward investors.
* Since October 2011, the fund has not disclosed its full portfolio and around 21% is stated as ‘Equity: Others’.
This article was originally published on February 21, 2012.
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