Head of equity at SBI Mutual Fund talks about his funds' performance

Dinesh Balachandran is the head of equity at SBI Mutual Fund. Among pure equity funds, he manages the SBI Contra and ELSS funds. While the former has delivered strong performance over the last few years under his leadership, the latter has also been doing well recently. SBI Contra Fund has been a recent addition to our list of recommended diversified funds. In this interview, Balachandran discusses what contributed to the fund's performance and a few stock and sector bets. Your Contra and ELSS funds have been doing well. What have been the performance drivers here? The stocks that do well in a stagnant economy and those that will do well during a broad-based economic revival are very different. During the period 2000-2010, the economy was in a very strong upcycle, leading to a rally in cyclical stocks - power, metal, telecom, cement, etc. As a result, overcapacity issues started cropping up in these sectors by the end of the decade. Over the next 10 years, economic growth was generally not so great. This coupled with the overcapacity-related issues led to cyclical sectors not doing well between 2011-2020. In this period. investors hence started gravitating towards the so-called secular compounders - consumption-oriented companies. But what happens is that any theme, however powerful it may be, is cyclical in nature. What made sense at the beginning of the last decade did not make as much sense at the end of it. In the case of consumer-oriented stocks, they are good quality stocks run by very competent management teams. However, towards the end of the decade, they faced severe over-valuation related concerns. And this happened just as the cyclical sectors

This article was originally published on May 08, 2024.