'Rate of recovery more in value and growth approach'

With India’s industrial growth having slowed to four per cent in August and the announcement of better-than-expected numbers by Infosys, the markets reacted and fluctuated accordingly. Apart from national factors, the bourses took cues from reports of stability in the European economy. The net worth of the Smart Portfolios fund managers did not stand unaffected.

Mehraboon Irani’s net worth stands at Rs 9,41,000, down 5.87 per cent, Ashish Mittal’s net worth is Rs 9,82,000, down 1.82 per cent, Rikesh Parikh’s net worth totals Rs 9,99,000, down 0.15 per cent, while Ajay Parmar’s net worth is valued at Rs 10,48,000, up 4.82 per cent.

For the week, Shilpa Johnson spoke to Alex Mathews, head technical and derivatives research, Geojit BNP Paribas Financial Services, on his betting choices and his portfolio. Having invested Rs 4,29,000 so far, his net worth stands at Rs 9,91,000, down 0.88 per cent. Commenting on his investment style Mathews said: “Markets have corrected heavily and there are many stocks, which have become cheap compared to individual stock valuations. And, these stocks are expected to move faster than the market’s recovery rate. Compared to the momentum approach, the rate of recovery will be more in value and growth approach. I have selected value and growth approach and I have added bottoms approach to my way of investment. Good companies will have the inherent value which may diminish with the market movement but will not be lost. I rely on that.”

Advocates of the bottom-up approach simply seek strong companies with good prospects, regardless of the industry or the macroeconomic factors. What, in your opinion, constitutes “good prospects”? What are the parameters you look at?
Good prospects definitely include industry growth, competition and macro factors, among others, but not restricted to these alone. Good prospects include good management, financial stability, expansion plans completed, future expansion plans and history of utilisation of cash reserves.

The only stock you have sold so far is NTPC and you booked a profit of nearly one per cent in the same. What was your strategy behind that? Had your targets been met?
My strategy was to exit the stock and move on to another stock in the power segment and I will do the same soon.

Your portfolio includes SBI, which has undergone the recent downgrade by Moody’s. With the threat of the rate-hike cycle looming over banks, do you still consider SBI a good bet?
Banking and infrastructure sectors are beaten down sectors. Rising interest rates have hindered growth in these sectors. But I expect the rate hikes to have reached saturation and I see just one more hike based on the importance the central bank gives to economic growth. And I expect SBI to recover faster than the broader market and compared to other PSU and private sector banks, SBI is attractive. We bought SBI at the 1986 level and it came down towards the 1710 level on October 5, 2011, but on October 12 it sharply went up beating the market towards the 1880 level.

Larsen & Toubro also made it to your portfolio even though it had lost steam in the last few months. Equity research houses expect the company to miss its forecast of a 15 per cent rise in orders during FY12. What is your take?
I give more weight on company valuation rather than near-term increase or decrease in the order book. Compared to its peers and other industry majors, L&T maintains a strong order book. Even if the order book may miss the estimates, still I rely on the inherent value of the stock.

India unveiled the draft of a new consumer-friendly telecom policy, this week. Will this have an impact on the holdings in your portfolio? How?
The new telecom policy does not have details about spectrum and license related issues and expect this to be included in the Telecom Act which will have an impact on the telecom players in the medium to long term. The new draft of telecom policy will bring a consolidation in the sector causing smaller players to exit and major players to revive their business. The only negative impact would be that of the abolition of domestic roaming charges. I am positive on Bharti Airtel.

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