WF : How different is your Focused 25 Fund from your more recent Multicap 35 Fund - in terms of positioning as well as portfolio structures?

Taher: The MOSt Focused 25 Fund is primarily a large cap fund with over 90pc of its current exposure to the Top 100 companies on the exchanges by market cap. Besides, as per the regulatory mandate of this fund, the fund's weight in companies beyond the Top 100 and upto the Top 200 by market cap cannot exceed 25% at any point.

In contrast to the MOSt Focused 35 Fund is a Multicap strategy that straddles the entire market cap spectrum in terms of investment opportunities and has no market cap restriction. Moreover, the F35 has the flexibility to invest upto 10% of the fund in foreign securities as well.

WF: The last 2 quarters (Jul-Sep 14 and Oct-Dec 14) have seen significant alpha generation across both these schemes. What are some of the key contributors to recent performance?

Taher: Both these funds have been constructed based on a bottom-up approach and to that extent the fund's performance over the past 6-9 months has been driven largely by some of the stock selections which had been undertaken over the past 12-15 months, which have played out very well during this period.

On a relative scale vis-Ã -vis their respective benchmarks, our relative overweight on sectors such as automobiles (~10-18%), private banks/NBFCs and consumer discretionary drove a large part of the alpha generated by the funds during this period. Having said, we would like to believe that it has been more judicious stock selection over sector allocation that has led to this outperformance.

WF: What, if any, are some of the key changes in portfolio strategy or composition that you have made in these 2 schemes over the last 6 months?

Taher: As a common thread across both the schemes, the effort has been to enhance the growth profile of the fund by either a) introducing more companies with a better medium-term growth-profile or b) raising the weight of those companies in the fund with higher growth over the others. In short, the strategy has been to pack in much more weighted growth into the portfolio as possible. In the current growth constrained environment of the economy, this strategy has worked with wonderful results.

More specific changes would include: Favoring downstream over upstream oil companies, higher disposition towards urban consumer discretionary with premiumisation potential compared to businesses that are rural beneficiaries and higher preference for pvt sector NBFCs over PSU banks.

WF: Is your investment philosophy closer to a value bias, a growth bias or a GARP (Growth At Reasonable Price) bias?

Taher: Our strategy can be clearly classified as GARP for both these portfolios. However, we are seekers of Quality Growth which has considerable longevity and is available at a fair price. To that extent we are not averse to paying a modest premium if necessary to bring in as much of good quality growth into our portfolios. Besides, our "Buy and Hold" strategy allows the required freedom to overcome strong valuation biases of the short-term in the quest for adding good quality GARP into our funds. As stated earlier, without compromising on the Quality aspect, our effort has been to increase the weighted average growth of the portfolio in recent times.

WF: Some experts believe that quality stocks have become quite expensive now, and inexpensive valuations are only to be found in not-so-strong businesses. Is it now getting difficult to find value in the market?

Taher: It is true to some extent that the recent strong preference for quality stocks has led to some of these companies trading at significant premium to the broad market and fairly expensive to even their own historical valuations. However, the important thing within this quality basket is to avoid "Quality Traps" i.e. companies of very high quality but where medium-term growth is constrained either due to industry or company-specific factors.

While we acknowledge that new ideas that can fit into our own rigorous investment framework that we call QGLP (Quality Growth with Longevity at a reasonable Price) are increasingly difficult to find, our portfolio approach of running very high-conviction, Buy & Hold, patient portfolios to a good degree obviates the quest for new ideas. Besides, given the concentrated style of our portfolios, we use the allocation tool to good effect to increase weight in some of our extant portfolio constituents when necessary.

WF: Earnings momentum has not taken off, and analysts are calling for more patience for it to gather material steam. What has gone wrong and what will it take for earnings to pick up to justify current valuations?

Taher: Earnings disappointment versus expectations in the recent past, have been largely due to earnings shortfall at PSU banks from slower moderation in NPAs (a large constituent of the market), industrials (due to slower recovery in the capex cycle) and the oil & gas sector (due mainly to the recent collapse in crude oil prices). We reckon that the Indian economy is in the midst of a slow cyclical recovery led by moderation in inflation and interest rates, gradual recovery of urban consumption demand and helped by the fortuitous collapse in commodity prices. The earnings recovery will likely gather steam in 2HFY16 from the combined benefit of these factors besides a favorable base effect. Meanwhile, the Govt's recent success at pushing through some crucial reforms (insurance, mining and minerals bill, coal mining bill etc) would have an important role in supporting this cyclical recovery and while also providing a foundation for a more sustainable growth in the future.

WF: What is your outlook for the market for the next 12 months and what do you see as the near to medium term drivers?

Taher: We think the economy is on a slow mend and the market will likely gradually move upwards as one see's more and more evidence of corporate earnings recovery. From a 2-3 year perspective, we believe all the ingredients necessary for a big rebound in economic growth and corporate earnings in India are falling into place. This will likely sustain current valuations since chances for a sharp upgrade to earnings estimates for FY17 cannot be ruled out. One should use sharp corrections in the market to one's advantage in building a quality long-term investment portfolio.

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