From Master to Magnum

SBI Mutual's new head of equities Sanjay Sinha says investors should stay away from companies that depend too much on external factors.

As head of equities at SBI Mutual Fund, Sanjay Sinha has a tough job at hand. His predecessor Sandip Sabharwal (Business Standard Best Equity Fund Manager for 2004-05) had set a scorching pace, with some of the funds nearly doubling in value last year, in a market that has appreciated just around 57 per cent.

But Sinha, who joined the firm in November 2005, has already made his presence felt. Two of the four equity funds that he himself manages, have given impressive returns, hovering around the 95 per cent mark for the past one year.

Of course, Sinha is an old hand in the world of finance and investments with 16 years of experience in the country's largest fund house, UTI Mutual Fund, where he had been managing nine funds accounting for nearly Rs 2,900 crore of investor money. At SBI Mutual Fund, he is responsible for Rs 9,300 crore assets spread across 17 equity schemes.

Sinha kick-started as a fund manager with four equity funds, including two index funds. To his credit, UTI Mutual's index funds received the best in category award by Icra for achieving the lowest tracking error.

Some of his other funds include UTI Mutual's all-time jewels Master Share, Master Growth, Petro Fund, Auto Fund and Basic Industries Fund. All these funds have consistently beaten their respective benchmarks. 
 

SINHA'S REPORT CARD
Fund Performance as on November 30, 2005
UTI Basic Industries fund	NAV	BSE 100
Since last 1 year	65.98%	39.23%
Since Inception	44.29%	28.08%
UTI Auto Sector fund	NAV	Sensex
Since last 1 year	45.36%	40.98%
Since Inception	33.73%	28.46%
UTI Master Growth	NAV	Sensex
Over last 1 year	35.48%	40.98%
Over last 3 years	49.67%	39.54%
Over last 5 years	26.20%	17.05%
Since Inception	14.61%	9.65%
Scheme Performance (%) as on Mar 17 , 2006
	1 month	3 months
SBI Magnum Global	13.13	27.50
SBI Magnum Multiplier Plus	10.53	27.71
Sensex	8.80	16.97

Sinha follows a bottom-up approach to investing. He evaluates every stock on three significant parameters "� the strength of business, the quality of management and stock valuations. To assess the quality of management, Sinha looks at whether the management is capable and confident of managing growth, whether it is an efficient user of capital and also how the company scores on transparency and corporate governance. "The management is the most important thing in determining the returns of the company," he says.

Once Sinha is reasonably satisfied on these counts, he looks at the business prospects and makes earnings projections for the future.

"Once we have the estimates ready, we see if the stocks offer value at the prevailing price. We buy stocks having values that are at a premium to the market prices." Especially, in today's circumstances when the Sensex is ruling at around 11000, we need to take cognisance of stock valuations in the context of the overall market.

"Stock selection contributes more to the performance of a fund than asset allocation" "� that's what Sinha strongly follows. He says it is usually news, whether about the company or about the industry as such, which leads him to the stock.

Sinha also has a piece of advice on which stocks to ignore: "If a company, for its earnings, depends more on external factors rather than on a strong and tangible business model, it is a sure sign to keep away."

This is one factor that has worked terribly against oil marketing companies, which were the core holdings in his UTI Petro Fund. This fund consistently topped the charts till 2004 when crude prices were still sane and subdued, but tumbled when the trend reversed. All because the company management did not have any control over factors that directly impact its profitability.

Among the scrips that Sinha spotted ahead of other fund managers were IBP, Hindustan Oil Exploration Company and Jubilant Organosys. One stock that he regrets after buying is RCF. The 40-year-old joined UTI Mutual in 1989 in the sales and distribution division at Kolkata. He started his stint in fund management as a dealer for domestic funds and gradually started managing funds.

This IIM-Calcutta graduate believes in Karma in the true sense. He says, "If you do your work with sincerity, recognition and rewards come automatically. In fact, this is true not just for my business but for all walks of life."

Sinha is currently bullish on the engineering, auto, cement and IT sectors and believes some stocks in the pharma sector are due for correction. He is also a strong believer in the principle of letting your investments grow and is against rapid churn, by both investors and fund managers. Even as equities are scaling new peaks every day, his expectations are modest.

"Over a time horizon of about three-five years, equities would give an annualised return of about 12 to 15 per cent," he says. And when Sinha does not talk about stocks and sectors, he watches movies on his personal home theatre with his family. He also loves travelling and reading.

"Beyond the Last Blue Mountain is one of my favourites," he says, adding "it is the biography of JRD Tata. If you read it, you will get a glimpse of the true spirit of an individual. I admire him because he faced his share of obstacles bravely and still managed to achieve all his goals."