Vetri Subramaniam, fund manager, Kotak Mahindra Mutual Fund
You have substantial exposure to mid-caps. Doesn't that increase the overall portfolio risk?
Yes, it's true. When you look at the numbers of stocks, mid-caps make up for nearly a half of our equity portfolio, but in value terms they only account for one-third.
We have a well-diversified portfolio of mid-cap stocks within our equity holdings. So we are not taking any undue risks. When it comes to investing in mid-caps, it is essential that you are not overexposed to a particular stock.
Over a period of three to four years, mid-caps tend to outperform large-caps as their risk-reward ratio is always higher.
Your healthcare sector holdings have been slashed from 13 per cent to nearly 7 per cent....
The pharmaceuticals sector has transformed from being a classic defensive haven to an aggressive growth story due to which the inherent risks have also increased making the risk-reward ratio unfavourable in the case of some stocks.
So we decided to whittle down our exposure to the healthcare sector across all our funds. We are selectively buying stocks which we think are available at reasonable valuations.
There seems to be a skew towards the financial services sector in your overall portfolio. What's the reason for this?
We follow a bottom-up approach while investing rather than taking a call on the sector. We invest in shares where we think we can get the best deal.
The financial sector scrips we hold such as State Bank of India, Karur Vysya Bank, HDFC Bank and LIC Housing Finance find our favour because their valuations are attractive and not because of a sector view.
What's your take on the market?
From the point of view of valuations and fundamentals, the market looks very attractive at present. The levels that some scrips have fallen to make them compelling buys. But the problem lies in the demand-supply situation.
The bourses have not seen significant fund flows and that's one of the main reasons for their lacklustre performance. I expect the bourses to gather some pace in the next two months.
