What is the fund's philosophy when it comes to maintaining a balance between equity and debt?
The fund maintains exposure to equity between 40 per cent and 60 per cent and the balance in debt. The asset allocation is done with a medium- to long-term view.
For example, till January 1999 the fund was overweight in debt and since then it has been overweight in equities. The allocation is done based on a number of factors including interest rates, PE multiples, earnings growth outlook, etc.
Banking stocks account for 14 per cent of your top holdings. Do you see further upsides in the sector?
The fundamentals of the banking sector look positive. Continued growth in deposits, expected improvement in credit over the medium term, falling NPAs, improving cost structures of the banks and low price-to-book and P/E multiples make the sector attractive.
The fund seems to be bullish on steel and cement sectors. What is the rationale behind this?
The fund is overweight in cement sector. This is done with a view that demand growth for cement will be 8-12 per cent per annum over the next few years.
The fund has recently loaded up on below-AAA bonds. Isn't this risky?
The investment strategy of the fixed income portfolio is to buy G-Secs on one hand and to buy AA-rated corporate bonds with upgrade potentials on the other. This is being done to improve returns while limiting the risk of spread expansion between G-Secs and AAA bonds. The fund has a reasonable track record of buying upgrade candidates.
