 
Prashant
Jain ANOOP
BHASKER RITESH
JAIN |
Volatility= opportunity Sacrifice
short term losses and focus on the big picture is Suresh Soni's
success mantra Squeezing out that extra percentage of yield when debt markets are languishing in a narrow band is a tough task even for the best in the business. But Suresh Soni, head of fixed income at Deutsche Asset Managment, also the Business Standard debt fund manager of the year in 2005, continues to be an exception. Soni has maintained a rate of outperformance of 38 per cent over his nine-year stinct at fund management. And currently, his Premier Bond Regular-G leads the category for the one and three month periods. What sepreates him from the rest is his ability to understand volatility and tackle it to his own advantage. To him volatility is opportunity spelt differently. “When you take a wrong call on interest rates and things don’t go as planned, you don’t cry over it. You have to figure out what to do and get on with it,” says Soni adding that in times of panic what you should do next will help you cut your losses rather than mulling over the losses you have already incurred. Soni’s prescription for good returns in the medium term is to have a disciplined approach to investments. “You should not be perturbed by market movements over the short term and stay focused on the medium term to bring home the gains,” he says. Soni likes to carefully pore over valuation information available in the market. “Before taking a call on the rates it is important to look at the 10-year yield vis-à-vis other tenures and judge whether they are appropriately valued, overvalued or undervalued,” he says. Timing of investments for Soni is based on this analysis. Besides, Soni likes to be alert to opportunities. An instance of this, according to him, came during FY06. There were pockets of liquidity tightness during October to February 06. And these were a combination of advance tax outflow, aggressive borrowing by banks to fund credit expansion and the redemption of India Millennium Bonds on December 29. Soni allocated a larger portion to cash to take advantage of the high short term interest rates. The impact on the market, according to Soni, goes beyond the domestic markets. He believes that your ability to generate handsome returns would depend on your insight into macroeconomic factors such as credit growth, inflation numbers, the interest rates of central banks and the linkages between international and domestic markets. And it does not end at the analysis stage. “Keep checking out the assumptions behind the logic you have applied,” says Soni. If the inflation rate six months down the line is pegged at 5 per cent but moves to 8 per cent you have to revalidate your assumptions to check if the logic was correct and act accordingly. “If a predominant factor goes wrong, then it is serious and you need to change your assumptions and targets,” says Soni. While
he believes that the current market is fairly valued and rate hikes
are coming to an end, the worrying factor, however, is the money
supply which is 20 per cent higher than last year and relative credit
growth at 31 per cent which is higher than RBIs target of 20 per
cent. “Credit quality should not suffer especially at a time
when credit has gone up so quickly,” he says.
• HOME Business Standard • FUND MANAGER • October 2006 |
