Among the value-oriented funds, Tata Equity PE Fund stands out for its methodical approach to picking value stocks. We recently spoke to its fund manager, Sonam Udasi who is a senior fund manager at Tata Asset Management to understand the intricacies of their stock selection framework. He also shares his sectoral views in the current market context. Tata Equity PE Fund follows a methodical strategy in its pursuit of value, as it invests 70 per cent of the portfolio in stocks with trailing P/E ratio lower than that of the Sensex. Help us understand what drives a stock's exit from the portfolio? This is one thing that the fund does consistently. While a fund manager can be biased when selecting sectors, this fund's mandate is 70 per cent is to be invested in lower PEs than the Sensex on a trailing basis and with the remaining 30 per cent, you can select your strategy. And every day, at a portfolio level, the fund should be 70 per cent lower than the Sensex. You cannot have 69 per cent in low PE and still have 31 per cent in high PE; you will have to course correct automatically. So, you have to make tough decisions and it is very hard to look at each holding and justify the same. So, when the time comes, even though you may have a biased view, you have no choice but to keep trimming some positions in that 30 per cent bucket and follow that discipline because it is written in the SID. If there is a legitimate reason for holding some of the stocks, the maximum leeway that I can get is 90 days, and I have done it only once in the last seven years. The fund has had quite a checkered performance in the last five years. While some recovery is noticeable, the fund needs to catch up to the benchmark and other value-oriented peers in terms of long-term performance. What's your take on this? First, let us tackle the underperformance since 2021. In the first portion of the COVID, we played very well and got out of financials completely and went very underweight d
This article was originally published on September 14, 2023.
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