Mutual Fund strategies you can steal from India's best portfolio managers

By examining the thought processes behind their investment decisions, Morningstar has uncovered the secrets to these top managers' successes.

Even India’s top portfolio managers—seasoned with decades of experience and backed by sophisticated research—make mistakes. The latest Morningstar report, The Hits and Misses of Top Portfolio Managers – India, offers a rare behind-the-scenes look into how some of India’s best-known fund managers handle both success and failure.

 

 Lesson 1: Discipline Beats Perfection

Manager to Watch: Sankaran Naren, ICICI Prudential AMC

 

Naren, one of India’s most respected fund managers, runs the ICICI Prudential Value Discovery Fund. He’s a master of value investing, buying stocks that are temporarily out of favor but fundamentally sound.Naren’s approach is rooted in being flexible and pragmatic. For instance, during 2021–22, he significantly reduced exposure to overheated sectors like IT and basic materials, and simultaneously increased his bets on energy and healthcare stocks. This sectoral rebalancing led to strong alpha generation. Yet, he isn’t immune to misses. His contrarian investment in Vodafone Group ADR didn’t play out well due to weak revenue, rising debt, and strategic uncertainty.

 

 

Still, Naren held onto the position, trusting his long-term thesis, and was eventually rewarded when the stock rebounded. His investment mantra is simple but powerful: make fewer mistakes, learn from each one, and stay disciplined.

 

 Hit: In 2021–22, he shifted away from IT and materials just before they fell, and increased exposure to energy and healthcare—moves that boosted the fund’s returns by over 7%.

 

 Miss: His contrarian bet on Vodafone’s global ADR didn’t work, hurting returns. But he didn’t panic-sell—instead, he held on with a long-term view.

 

Investor takeaway: Don’t expect to be right every time. Instead, focus on making fewer mistakes, being adaptable, and staying committed to high-conviction ideas.

 

Lesson 2: Stick to Quality—Even When It’s Unpopular

Manager to Watch: Neelesh Surana, Mirae Asset Mutual Fund

 

Surana is known for his calm, research-led stock selection. He looks for strong businesses with good leadership, even if the market is chasing hot trends.Surana has built a reputation for holding strong companies even through volatile phases. His early bets on tech-driven companies like Zomato (Eternal) and Policybazaar (PB Fintech) illustrate this approach. Despite initial market skepticism, Surana stayed invested through short-term volatility, confident in the companies’ long-term potential. Both stocks delivered impressive returns in 2024, validating his research-driven conviction.

 

However, his disciplined stance meant underperformance at times. He avoided sectors like industrials and PSUs during their rally in 2023-24 due to valuation concerns. While peers benefited from these upswings, Surana stuck to his belief in quality and stayed away from cyclical hype.

 

Hit: He invested early in tech startups like Zomato and Policybazaar. Despite initial market skepticism, he held on—and these stocks surged 125–138% in 2024.

 

 Miss: His reluctance to invest in industrials and PSU banks during their boom phase caused short-term underperformance.

 

Investor takeaway: Focus on long-term fundamentals, not hype. Some of your best investments will be the ones nobody believes in—yet.

 

 Lesson 3: Play It Safe with Debt? Do It Right

Manager to Watch: Suyash Choudhary, Bandhan Mutual Fund

 

Fixed income investing is often about stability, but Suyash Choudhary, Head of Fixed Income at Bandhan Mutual Fund, brings tactical finesse to it. Known for his macroeconomic expertise, Choudhary takes duration-based calls based on interest rate trends and monetary policy expectations.

 

In 2023, anticipating a shift toward rate cuts, he increased the duration of Bandhan Dynamic Bond Fund significantly. This timely call allowed the fund to outperform peers as rates softened and bond prices rose. However, not all his calls worked perfectly. In 2021, overexposure to G-secs hurt returns when corporate bonds outperformed. And in 2022, an unexpected RBI rate hike took the market (and his fund) by surprise.

 

Despite setbacks, Choudhary’s consistent, well-reasoned strategy has paid off in the long run, making him one of the most trusted fixed-income managers in India.

 

 Hit: In 2023–24, he increased the duration of his bond funds anticipating RBI rate cuts—his Dynamic Bond Fund became a top performer.

 Miss: In 2021, he went heavy on government bonds when corporates were outperforming. Plus, an unexpected RBI rate hike in 2022 caught him off guard.

 

Investor takeaway:  Even in low-risk investments like debt funds, timing and macro understanding matter. Choose debt fund managers who read the interest rate cycle well and adjust strategy accordingly. For long-term gains, discipline and foresight are key.

 

 Lesson 4: Conservatism Can Still Win

Manager to Watch: Shobhit Mehrotra, HDFC Mutual Fund

 

Shobhit Mehrotra, HDFC’s veteran fixed income manager, is the classic conservative investor. His style favors capital preservation, superior credit quality, and consistency over eye-catching returns. While this may lead to underperformance in bullish phases, it helps avoid deep drawdowns.

 

For example, during 2021–23, while many peers chased high-yield, lower-rated bonds, Mehrotra stuck to top-rated securities and maintained portfolio liquidity. His HDFC Medium Term Debt Fund benefitted when credit risks rose again, outperforming many peers. However, his Credit Risk Fund lagged in earlier years due to low exposure to riskier, high-yield papers that performed well in buoyant markets.

 

His success lies in staying true to a quality-first approach, even when it isn’t trendy. When the rate cycle turned favorable again in 2023–24, Mehrotra’s strategy paid off with top-quartile performance.

 

Hit: In 2023–24, he stuck with quality AA and AAA bonds, avoiding the risky, low-rated segment. His Medium Term Debt Fund delivered strong returns. 

 Miss: Being too conservative in earlier years meant he missed out on high-yielding credit opportunities in 2021–2022.

 

Investor takeaway: If you’re a risk-averse investor looking for stable returns, conservative debt funds can still deliver—especially in volatile times.

 

 Key Takeaways for Investors 

• Mistakes are part of the game: Don’t aim for perfection—aim for consistency and discipline
• Stick with your convictions: Ignore noise and back businesses you believe in
• Quality matters: In both equity and debt, don’t compromise on fundamentals
• Be patient: Good ideas may take time to work—avoid panic selling
• Understand risk Choose funds (or stocks) that match your risk tolerance

 

What you can do now:

• Review your mutual fund portfolio: Are your managers consistent and aligned with your risk profile?
• Avoid chasing recent winners: Look deeper into strategy and track record, not just past 1-year returns.
• Diversify: Mix value and growth, equity and debt—just like the pros do.
• Think long-term: Even the best funds underperform sometimes. Stick with quality managers through the cycle.

 

"The quest for flawless portfolio managers is a fantasy. Even the best investors make mistakes, underscoring the importance of adopting a long-term perspective when evaluating portfolio managers’ capabilities. It is essential to consider the frequency of misfires and whether these missteps align with the manager’s style, philosophy, and experience. The portfolio managers highlighted above possess many valuable attributes, including their emphasis on fundamentals, willingness to go against the tide, long-term focus, and measured risk-taking, all of which allow them to unearth great investment opportunities. Equally important, they maintain a candid attitude toward their errors, consistently reflecting on and learning from them, which we believe is crucial for enhancing future returns," said Morningstar in its report.