ETMarkets Fund Manager Talk: Hunting for bottom-up opportunities? This fund manager has two sectors to look at

What kind of bottom-up opportunities are you seeing after the 12-18 months of correction in equities?

A bottom-up investment approach is ideal in this scenario, as we place greater emphasis on analysing individual companies to make informed investment decisions. There are several sectors that we find particularly promising.

Financials: Our optimism towards the financial sector remains unwavering, as we recognize the vast growth potential for lending in India’s long-term trajectory. The current state of lenders’ balance sheets is notably robust compared to the preceding decade, and credit growth has reached its highest levels in 10 years.

Consumer Discretionary: With the rise of disposable incomes, we anticipate a substantial surge in consumer expenditure within India. We have observed similar trends in other nations, such as China, and we expect India to follow suit once a certain income threshold is reached. In the short term, we have witnessed a slight decline in valuations within this sector, enhancing the risk-reward profile and presenting exciting investment prospects.

We are also confident on manufacturing exports as a theme in India. One significant driver is the “China + 1” strategy adopted by companies worldwide. Moreover, India has implemented favourable regulatory policies that are conducive to manufacturing growth.

How much AUM do you directly oversee at 360 ONE Asset?
I manage Category 3 AIFs, with a total AUM of Rs 2,732 crore. Additionally, I am involved in managing assets for our offshore institutional accounts with an AUM of Rs 13,524 crore. Our listed equity AUM is Rs 24,754 crore, while 360 ONE Asset Management Ltd manages a total AUM of Rs 58,298 crore across alternative investment funds (AIFs), portfolio management services (PMS), mutual funds (MFs), offshore & advisory.

Your 360 ONE Multicap PMS funds have given stellar returns on a 3-year basis. What has driven the growth and what is the allocation strategy?
We understand that successful investing goes beyond momentary reactions to market conditions. It involves developing effective strategies that help minimize room for errors and biases.

Our asset allocation strategy utilises the SCDV (Secular, Cyclical, Defensive, Value) framework. This framework classifies companies based on profitability and return on equity, helping us identify secular growth companies while being cautious about potential value traps.

Furthermore, we tactically switch between defensive and cyclical sectors based on market conditions, aiming to optimize portfolio performance across different market cycles.

In the midcap and smallcap segments, where do you see investors chasing money?
Investors often tend to chase money based on market capitalization based on what is working in the short term. However, we believe that market cap should not be the deciding factor for investments. Adopting a flexicap approach may be ideal in the long run. This approach allows for greater flexibility in allocating investments across different market caps, enabling investors to focus on the potential of individual companies rather than solely relying on their market capitalization classification.

Which funds are expected to see higher traction in the coming months? Largecap, midcap, or smallcap category?
Embracing a flexicap approach may prove more advantageous in the long term. Such an approach affords a heightened degree of flexibility in allocating investments across various market capitalization segments, empowering investors to prioritize the inherent potential of individual companies rather than relying solely on their classification based on market capitalization.

Which are the sectors your asset management is extremely bullish/bearish on and why?
We maintain a bullish stance on two key sectors: Financials and Consumer Discretionary.

Financials: Our conviction in the financial sector remains steadfast, driven by India’s promising long-term growth prospects for lending.

Consumer Discretionary: With the ascent of disposable incomes, we anticipate a remarkable surge in consumer spending in India, akin to the experiences witnessed in countries like China. This growth trajectory will be supported by shifts in the labour structure, as the transition from informal to contractual employment bolsters consumption patterns.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)