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WF : To what extent do you see global concerns like increase in US interest rates, dipping growth in Europe, stretched valuations of US equities and withdrawal of US Fed's QE impacting our domestic equity market?
Dharmendra : We believe that the global concerns have the possibility of introducing some volatility in the global equity markets and in some way, on our domestic markets also. However, we are of the belief that the Indian markets will remain a preferred investment destination for the global funds providing a good combination of growth and valuations.
WF : SBI Equity Opportunities Fund - Series I presentation talks about clear focus areas of the new Government. A lot of media attention has been given to the new Government's first 100 days. From a market perspective, what are some of the actions taken in these first 100 days that strengthen your conviction in the long term bull case?
Dharmendra : As we have highlighted in our presentation, the decisions taken be the government in relation to channelizing the domestic savings, liberalising FDI norms especially in Railways & Defence and focussing on removing the bottlenecks in infra development are the key steps in the direction of providing growth fillip.
WF : The presentation talks about revival in earnings growth. Given that markets are no longer cheap, do you see the required momentum in earnings growth right now or should we brace ourselves for a sideways move for a few quarters ahead, until earnings catch up with markets?
Dharmendra : Given that we believe that the earnings growth momentum will be strong in the next 2 years and global liquidity will be conducive, it is difficult to forecast the market movement over the short term. We are optimistic about the market direction over the next couple of years.
WF : For SBI Equity Opportunities Fund - Series I, you are looking at the small and midcaps space quite keenly. This is a segment that has seen the sharpest run up over the last 12 months. Do you see a strong investment argument for this segment, even after this run-up?
Dharmendra : We believe that the combination of the investing themes and our research process & capabilities will provide us the opportunity to identify stocks in the small and mid cap space as it is a huge universe and does not get captured completely by the index.
WF : Since this fund is a no cap bias fund, will you be flexible in your approach towards large vs mid caps or will this fund have a majority proportion of allocation to the mid and small caps space through the next 3 years of its tenure?
Dharmendra : Yes, as we have seen in the past, the improvement in the financial performance and the stock price movement in the small and mid cap space tend to outperform the large caps, we will have a positive bias towards this set of stocks.
WF : Some advisors are wary about closed ended funds due to two perceptions (1) relative inflexibility for an investor due to product construct and (2) lack of adequate fund manager focus after the initial portfolio is cast, as there are no new flows to attract. Do you believe these come in the way of delivering value to investors?
Dharmendra: We have a process of close monitoring of the investment opportunities after the initial portfolio is built both in terms of existing portfolio and also for identifying newer opportunities. The focus on the closed-ended portfolios will be as intense as in case of the open-ended portfolios. A three year close ended fund would allow the fund manager to manage the portfolio efficiently and to construct a concentrated portfolio with high conviction ideas. Returns in equity markets are non-linear and to capture them, the fund manager needs to act with patience and discipline, closed ended fund allow the fund manager far more flexibility to ensure a disciplined approach to investing than open ended funds. Also, a three year closed ended fund offers the flexibility to create a portfolio with long term view and invest into stocks with a three year perspective.
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