Interview with Mr. Aniket Inamdar, Senior Fund Manager, Deutsche Mutual Fund
Mr. Aniket Inamdar is the Senior Fund Manager, Equities with Deutsche Mutual Fund and is currently managing two schemes namely DWS Investment Opportunities and DWS Alpha Equity. He has joined the AMC as recently as in May 2007 and the sudden turnaround in the returns of the schemes managed by him is an ample reflection of his fund management skills. BCCIR had an opportunity to interact with Mr. Aniket on issues related to broader economy as well as equity markets and the performance of his funds. Excerpts of our interview with Mr. Aniket are as under:
Q1 We have seen remarkable improvement in the performance of some schemes like DWS Alpha Equity Fund and DWS Investment Opportunities Fund. Is it because of the change in the whole investment process or good stock picking in the recent times? Please throw some light on your investment process.
Ans: All the three schemes managed by us, DWS Alpha, DWS Investment Opportunity and DWS Tax Saving have performed well during the year. The performance is a result of some sectoral calls and some bottom up stock picks. The portfolios were overweight on capital goods, natural resources and steel sectors which helped performance. The portfolios were underweight on IT services, pharma, auto which were sectors that saw lackluster performance.
Our investment approach is to have a combination of top down and bottom up strategies. We typically don’t have very large number of stocks in the portfolios but ensure that there is adequate diversification. Our portfolios are always fully invested. We believe that it is stock selection rather than taking aggressive cash calls that will deliver superior and consistent returns.
Q2 What is your reading of the state of the Indian economy?
Ans: The macro-economic outlook appears positive. Inflation is under control while interest rates appear to have peaked. The twin drivers of corporate capital expenditure and infrastructure build-out will ensure that the domestic manufacturing sector does well on a multi-year basis. Tax collection numbers are quite buoyant. While the economy is unlikely to grow at the 9% pace seen in the recent past, we believe that GDP growth is likely to be at around 8% for FY09 which is quite robust.
Q3 How do you see corporate earnings for FY08 and FY09?
Ans: We feel that with a long term GDP growth rate between 7.5 to 8%, earnings growth is likely to be in the 15-20%. There are likely to be many stocks that would be growing much faster than this rate.
Q4 What is your sense of FII flows in Indian market for the next quarter, since last quarter in US is expected to be bad?
Ans: While we cannot predict flows, it must be noted that India would still be one of the fastest growing economies in the world in CY08. Also, the impact of a possible slowdown in the US would be relatively lower on the Indian economy than it would be on many economies which are more export oriented. Hence, India would remain on the map of foreign investors, though the quantum of flows cannot be predicted. Domestic liquidity appears positive considering the expected inflows to insurance companies and mutual funds.
Q5 Which sectors look promising for next one or two years?
Ans: Capital goods, engineering, natural resources, steel, select stocks in the energy sector look promising from a long term point of view.
Q6 Would you take a contrarian call on some sectors like technology, auto, real estate and pharma?
Ans: Sectors like technology, pharma and autos have underperformed significantly in 2007. Valuations for these sectors are not demanding. However, each of these sectors has its own sector specific drivers. For eg. Many investors are waiting to see the impact of a possible slowdown in the US on Indian software companies. There are concerns on billing rates as well as on volume growth for the next year. Naturally, if the growth rates do not slow down drastically or of there are no billing rate pressures visible, the sector should do much better in 2008. As we progress into 2008 investors will get a much better handle on these issues. Overall, these sectors will be keenly watched by investors.
Q7 Midcap stocks have seen run up in recent times and some mutual funds have also started deploying money into mid cap space. What is your call on this space and do you find mid cap more interesting than large cap in the coming year?
Ans: We look at stocks based on their long term growth potential. Mid and small caps are always interesting in the sense that most of the emerging leaders come from the mid and small cap space. But that does not mean large caps do not have the potential of giving strong returns. We expect small and mid caps to do well in 2008. After the meaningful out-performance of small and mid-caps over large caps in the last two months of 2007, we feel activity in small and mid cap space will turn more stock specific rather than broad based as is being witnessed now. We believe there are plenty of opportunities in the market on a stock specific basis.
Q8 What would be your strategy to cope up with the volatility while managing your funds?
Ans: The high level of volatility which we saw in 2007 can be expected in 2008 as well. One should not get unduly swayed by new term news flow and events but focus on buying quality stocks with good long term potential.
Q9 What is your advice to retail investors amid high volatility in the equity markets?
Ans: The last few years have been very rewarding for investors. We like the long term potential of the Indian economy and hence, are positive on the equity markets. Going forward, investors should have more realistic expectations of returns. Investors should not focus on excessive trading or get unduly worried in periods of high volatility but should invest with a 3 year horizon in mind.