'Adopt stock-specific activity'

In the second series of interviews in Smart Portfolios, Amar Ambani, vice president (research) India Infoline, talks about his current investment strategy and his advice to investors with Rex Cano.

Since the launch of Smart Portfolios on September 1, 2008, the benchmark index, BSE 200, has slumped nearly 36.3 per cent, while Amar Ambani's portfolio has seen a appreciation of 0.34 per cent.
 

BEST PERFORMERS
Company Name	Net Chg (Rs)	% Chg
Reliance	12117	40.5
Indianbulls Real	5365	23.2
Jaiprakash	5705	21.3
Bharti Airtel	4878	17.2
BHEL	5976	13.1

 

WORST PERFORMERS
Company Name	Net Chg (Rs)	% Chg
Jaiprakash	9520	29.2
Axis Bank	7927	23.2
Jindal Saw	12960	23.0
Indiabulls Real	4072	17.4
GAIL	7387	11.2

Have you made any changes in your strategy due to the global financial crisis?
From the start of Smart Portfolios, my strategy was to maintain a high level of cash. That hasn’t changed and in fact I’m fully in cash now. Not often in life, inactivity is advocated. However, with the global crisis unfolding rapidly causing a one-way slide in the market, the last few months was definitely one such rare occasion.

What will your strategy be going forward?
The strategy going forward will depend on how the economic situation pans out, globally and in India. I had mentioned in my previous interview that it is an erroneous notion that a fund manager should remain invested at all times. What’s best in the client’s interest should be done. If the situation demands maintaining high cash, then the approach will not change.

Are the current government policies - RBI rate cuts & stimulus package - enough to revive growth?
Steps taken by the RBI have, to an extent, helped ease liquidity. The government’s fiscal package may offer some relief. But these measures may not be enough to revive the economy anytime soon. Let me explain why. Non banking sources like IPOs, bonds and ECBs, which comprise roughly 30 per cent of loans given in the system, have dried up.

Banks have lent at a high rate in the past few years and now need to focus on asset quality. Deposit rates have also fallen and remain high in cost. This makes capital scarce and costly.

Globally too, it will take more than the announced packages to make up for the massive destruction in equities, commodities, corporate bonds and realty asset classes. After years of unmonitored growth, the world is paying for the huge pile up in leverage, a casual attitude towards risk management, asset froths due to cross-border carry trade flows and step up in derivatives. The world will have to make the painful adjustment, which will take time.

What stocks have worked for you and what haven’t?
Taking advantage of oversold market and stock situations has worked for me. Maintaining high cash levels has helped. The last set of trades didn’t work in my favour.

Cash has played an important role in Smart Portfolios. What will your strategy be with respect to cash?
Cash has proved to be king in the last few months. I will look for opportunities to deploy the fund judiciously in the coming months.

What are the sectors you think will do well going forward and why?
In terms of sectors, telecom, pharma and FMCG look good overall. However, we believe in being stock specific in the present scenario. My focus would be to select companies with reasonable earnings visibility, demand inelasticity, exposure to the rural market, low financial leverage and throw-away valuations.

What is your advice for investors?
I had earlier mentioned that the best time for equity investing is fast approaching. Keep a close eye on the market, be stock specific and wait for better values to emerge. Extreme volatility during bear markets creates opportunities to pocket companies trading well below fair value.

For those considering the mutual fund route, invest in diversified schemes that primarily invest in large caps and have a high proportion of cash, which can be deployed at lower levels. 

Anand Agarwal Vice President Reliance Money
Top Holdings	% of assets	Cost (Rs) Price	Current price (Rs)	Value (Rs lakh)
Jet Airways	7.42%	165.50	149.1	0.60
Bajaj Hind	3.64%	45.55	48.8	0.29
Total investments	11.06%	-	-	0.89
Cash	88.93%	-	-	7.15
Net worth	-	-	-	8.04
Returns (%)	-19.62	-	-	-

 

Sadanand Shetty Vice President Kotak Securities
Top Holdings	% of assets	Cost (Rs) Price	Current price (Rs)	Value (Rs lakh)
Reliance Ind	8.49	1169.58	1306.20	0.78
BHEL	5.45	1294.51	1359.65	0.50
SBI	5.26	1154.76	1214.65	0.49
Sun Pharma	3.83	1019.23	1103.80	0.35
ICICI Bank	3.57	374.41	411.45	0.33
Total investments	29.92	-	-	2.76
Cash	70.08	-	-	6.47
Net worth	-	-	-	9.23
Returns (%)	-7.72	-	-	-

 

Kashyap Pujara Fund Manager ENAM Direct
Top Holdings	% of assets	Cost (Rs) Price	Current price (Rs)	Value (Rs lakh)
Sterlite	13.81	410.13	292.85	1.17
Reliance Ind	7.70	1640.73	1306.20	0.65
ICICI Bank	4.85	521.55	411.45	0.41
Century Tex	4.13	343.87	175.30	0.35
Grasim Ind	3.16	1175	1073.60	0.27
Total investments	36.60	-	-	3.10
Cash	63.40	-	-	5.38
Net worth	-	-	-	8.48
Returns (%)	-15.20	-	-	-

  

Amar Ambani
Vice President (Research)
India Infoline

Amar Ambani is 100 per cent in cash. His net worth stands at Rs 10.03 lakh.