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The market is building in 15% earning growth next year: Sohini Andani
Mon, Apr 11, 2016
Source : Jeni Shukla, Citrus Interactive

Ms. Sohini Andani is the Fund Manager at SBI funds Management Pvt. Ltd. She has more than 18 Years of experince in Financial Services. She has qualifications of B.Com and CA.  She has been working with SBI funds Management Pvt. Ltd as Head of Research for 2 years. Prior to joining SBI Funds Management Pvt. Ltd. Ms. Sohini was with ING Investment Management Pvt. Ltd., where she worked as Senior Analyst and was responsible for contributing to Fund Managers and the CIO on their equity investments. Before that she worked with many organizations viz: ASK Raymond James & Associates Pvt. Ltd., LKP Shares & Securities Ltd., Advani Share Brokers Pvt. Ltd. CRISIL, K R Choksey Shares & Securities Pvt. Ltd. handling primarily equity research responsibilities.

Presently she is fund manager of SBI Bluechip Fund, SBI Magnum MidCap Fund and SBI Banking and Financial Services Fund.

In an exclusive interaction with Citrus Interactive she shares her views on her fund philosophy and the market.


Both SBI Bluechip and SBI Magnum Midcap have consistently beaten their benchmark and the peer set averages. What has worked in favour of the funds? In the last 1 year the funds have fallen much lesser compared to their benchmarks.

What has helped us in good markets is what we bought into and what helped us in bearish markets is what we did not buy into. In the rising phase the sectors which we were overweight on - like consumer discretionary - especially auto/auto ancillary - and healthcare gave us a significant alpha. Apart from that we are very focused on stock selection across sectors. In every sector the stocks that we had invested in did much better than the benchmark stocks. In falling markets what helped was what we avoided buying. We were not invested in any of the highly leveraged companies. We were not heavy on IT, banks and PSUs. Our thought process in both the funds has been that we are managing both as growth funds and we are looking at long term growth visibility in the funds. We select companies which we feel will be able to generate growth in the long run (4 to 5 years), good management quality and efficient use of capital. We prefer companies which do not depend on government and have their own demand-supply dynamics in place.


How is the SBI Magnum Midcap Fund differentiated from SBI Emerging Businesses, SBI Small and Midcap and SBI Magnum Global 94 in terms of positioning?

SBI Emerging Businesses is positioned as a high risk strategy where there are no caps on market capitalization allocation and sector/stock selection. It is a high conviction portfolio with a maximum of 25 stocks. The benchmark is S&P BSE 500 and not a midcap index. SBI Magnum Global 94 is defined as a quality midcap fund. The stock selection is based on criteria like minimum growth, minimum return on equity etc. It tends to have a large and mid cap bias. SBI Magnum Midcap doesn’t have such criteria and can select any midcap stocks and tends to have a mid and small cap bias. In case of Magnum Midcap Fund we have to remain at least 65% into midcap stocks and minimum 10% in small caps. The maximum exposure to small caps can be 35%. Up to 20% can be invested in large caps. SBI Small and Midcap has 50 to 70% exposure to small caps.


You manage a large cap and a midcap fund. Which market cap segment is likely to outperform in the next 1 year according to you?

First of all one should not look at returns from a 1 year perspective in the equity markets because it is difficult to predict. From a long term perspective, midcaps always outperform large caps. Of late in the last 2 years midcaps had turned up a lot more sharply than large caps. There was some froth built in the midcap space. Some part of the froth is already corrected. Valuations have now become reasonable but they are still not at a discount to large caps. I am not sure whether midcaps will outperform large caps from in the next 1 year but with a longer term view, midcaps will outperform.


What is your outlook on the equity markets?

The markets turning upward in the last few days had more to do with the global events like the crude oil prices moving upward, and some risk appetite returning which led to foreign investors turning into buyers. We find many emerging markets going up a little in the recent period. We have rallied a bit from too much pessimism. The course of the market will be decided by growth visibility over the next 3-4 months. If we see a good improvement in earning trajectory the market will sustain on the higher side. It might not show up in the fourth quarter but after the fourth quarter we will get some clarity on what FY17 will look like. The market is building in 15% earning growth next year. If there are disappointments on that front the market cannot go up significantly from here. Other events like US Fed hike and other global events will also have an impact. The muted global growth weighs on our growth also. I don’t expect the market levels to go up significantly in a hurry. It will be volatile and the Nifty will move in 7,000 to 8,000 range for some time till some clarity emerges. However, from a 2 to 3 years perspective I am very positive that growth will return to our markets. I would recommend investing in the markets in a staggered manner over next 6 to 12 months.


SBI Magnum Midcap is near Rs. 1,500 crore in size. Do you feel a large sized mid cap fund might affect its performance?

In case of a midcap strategy size becomes a constraint at some point but I feel at Rs. 1,500 crore we are nowhere close to that point. In my opinion we can even double from here without much problems. The size should be seen in relation with the current total market capitalization. The threshold might move up as market cap of the overall market increases.

 

Both the funds have more than 50 stocks in the portfolio. Please comment.

We generally try to maintain 45 to 50 stocks. Some exposures are marginal and we are in the process of exiting them. We are not fixated with the number of stocks. However, we would not want to have more than the current number of stocks. In periods of volatility and uncertainty we might become more diversified whereas in periods where we find some good high conviction ideas we might run a slightly more concentrated portfolio.


Which sectors are you bullish/bearish on?

Within cyclicals we are overweight on industrial and cements but underweight on financials. Within defensives we are overweight on healthcare and underweight on IT.
 
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