'We look for value'

Dhawal Mehta, Senior fund manager at HDFC Mutual Fund

We follow a bottom-up strategy to stock picking. We rely on old-fashioned fundamental research for evaluating stocks. Our focus is on companies that have a good business model, earnings visibility and transparency.

These factors allied to attractive valuations are the main criteria for stock picking. As long as there is value to be unlocked in these stocks, we don't hesitate to buy them.

The fund has cutting down exposure to mid and small caps of late. What is your view?

While it is true that our allocation to mid and small caps have come down of late, we haven't taken a conscious decision to cut down exposure to these segments.

Some stocks in this segment were becoming expensive, which is why we decided to pare exposure to them. However, it is based on individual stock valuations and not a broad strategy.

Automobile sector has the highest allocation in your portfolio. What is the outlook on the sector?

Growing consumption patterns, low interest rates and cost cutting measures adopted by auto companies augur well for them. Again as I mentioned earlier, our high allocation to the auto sector is mainly because of individual stock perceptions rather than any sectoral view. Most of these stocks also have reasonable valuations.

What is your view on equity markets in general?

Markets are likely to witness volatility in the short-term. Though stock valuations are not looking cheap, they are not too expensive either. Given an expected earnings growth rate of 15 per cent, average equity market returns should range between 15 to 20 per cent.