'I am a perennial bull on small- and mid-caps'

R Srinivasan, CIO - Equity at SBI Mutual Fund and the chief architect of SBI Small Cap Fund's dream run, is an interviewer's dream. Unlike many folks in the industry, he is comfortable tackling the most unpleasant of questions. There's also the fact he is one of the few fund managers in the industry who has made his name by using the bottom-up approach to choosing stocks (a style of stock selection that focuses more on the company stock and less on market cycles). "I am not much of a macro expert," he tells me matter-of-factly. This streak of honesty carries through the rest of the conversation as he talks about his stock holdings, market valuations and the small-cap universe. We hope you enjoy reading this conversation as much as we enjoyed doing it. Given that Search still generates over half of Google's revenue, do you think the release of ChatGPT by OpenAI can disturb Google's monopoly in the search engine market? ChatGPT is a kind of a chatbot, a large language model that uses AI to answer complex questions conversationally. The results seem remarkable so far and it will likely improvise significantly with time. Microsoft owns a minority in OpenAI, the company that has developed this. It is difficult to estimate how ChatGPT can disrupt Google's business model. It is possible that search functions get replaced by either ChatGPT or something similar given that both involve humans interfacing with computers to acquire information that's out there on the net. It is a bit premature to judge the performance of ChatGPT as of now relative to the reliability of a search engine. While people are raving about it there are also enough examples of major errors in response. Secondly, it is multiple times more expensive than search. Also, just because Google is silent about its research, it is naïve to believe that they might not be working on something similar. I've read Pichai saying somewhere that they haven't launched a rival yet because of reputational risks. Net-net, our research view is that Alphabet is inexpensive relative to the strong competitive advantages it enjoys. We have no reason to believe that the company is not well-positioned to take advantage of an evolving AI technology, going forward. Be that as it may, we will continue to watch these trends as they develop and change our view, if need be. Why did you sell your position in a global streaming company in SBI Focused Equity Fund? You still have the stock in the SBI Magnum Children's Benefit Fund-Investment Plan, where in fact, it has now become the top holding? What were the reasons for your exit, especially since the stock hasn't recovered much since its fall earlier this year? I still like the stock though I'm not sure if it will recover its lost gains

This article was originally published on January 06, 2023.