In the second series of interviews in Smart Portfolios Anand Agarwal, fund manager, Reliance Money, talks about his current investment strategy and his advice to investors with Rex Cano.
Since the launch of Smart Portfolios on September 1, 2008, the benchmark index, BSE 200, has slumped nearly 41 per cent, while Anand Agarwal's portfolio has seen a depreciation of 20.3 per cent.
Have you made any changes in your strategy because of the global financial crisis?
The global financial crisis has been in progress for well over a year and was triggered by the US subprime crisis in the fourth quarter of 2007. But the financial crisis has increased in intensity since September 2008. Going forward our strategy would remain the same more or less and we would look to focus on companies with sustainable business models and cash flows. Given the fact that valuations have come off significantly we would be looking to deploy part of the cash in the portfolio at an appropriate time.
What kind of companies will you be buying now?
The strategy would be to focus on good quality companies, which are having positive free cash flows and quality management. The companies should be able to meet their capex requirement from internal accruals. Moreover, the focus would be on companies, which would benefit from government spending programme and are more of a domestic growth story. Also given that commodity prices have come off significantly we would also focus on companies, which would benefit from falling commodity prices.
What are the stocks that worked for you and those that didn’t?
Except for our bet on the aviation sector which has hit our performance significantly, most of our bets on other stocks and sectors have panned out satisfactorily. However, given that crude oil prices have fallen from over $100 a barrel to around $40 a barrel in line with our expectations, we remain positive on the aviation sector and we feel that the worst is over for the sector.
Cash has played an important role in Smart Portfolios. What will your strategy be with respect to cash?
Cash has played an important role given the high volatility which we have been witnessing since we started Smart Portfolios. We expect the high volatility levels to continue into the first half of 2009. Going forward we would like to maintain some cash balance in the portfolio, as it would be a hedge against any unforeseen volatility.
What are the sectors you think will do well going forward and why?
We maintain our earlier stance on sectors. The sectors, which are likely to do well, going forward, would be capital goods, utilities and telecom. We continue to maintain our positive stance on the aviation sector. Moreover, any sector which benefits from falling commodity prices are likely to do well once we are through with the worst of the credit crisis.
What is your advice to investors?
We think that the Indian stock markets have gone through a period of capitulation and are trading at reasonable valuations as compared to the future expected growth rate. We think that now is the time to start picking stocks based on their merits. One cannot time the markets to perfection so one should not be averse to some mark to market losses in the interim period as the volatility in the markets is likely to continue for some more time.
| BEST PERFORMERS | WORST PERFORMERS | ||||
| Company Name | Net Chg (Rs) | % Chg | Company Name | Net Chg (Rs) | % Chg |
| Indian Bank | 4,270 | 8.7 | Deccan Aviation | -23910 | -62.2 |
| Aban Offshore | 7953 | 7.0 | Jet Airways | -88480 | -59.3 |
| BHEL | 3,279 | 4.2 | HDIL | -10970 | -34.2 |
| Axis Bank | 662 | 2.0 | Reliance Comm | -31405 | -26.5 |
| HDFC Bank | 691 | 1.1 | Tata Steel | -27470 | -25.0 |
| PORTFOLIO VALUES | ||
| Fund Manager | (Rs in lakh) | % return |
| Amar Ambani | 10.03 | 0.34 |
| Anand Agarwal | 7.97 | -20.32 |
| Kashyap Pujara | 7.99 | -20.14 |
| Sadanand Shetty | 9.01 | -9.93 |
| BS 200 (Benchmark) | 5.92 | -40.75 |
| Starting corpus of virtual portfolio: Rs 10 lakh | ||
