Value investing has worked over the last 60 years in America

BFSI Industry Interview
On: Feb 28, 2014 | From: Advisorkhoj Team

Sankaran Naren is the Chief Investment Officer of ICICI Prudential Asset Management Company Limited. Over the last 9 years with ICICI Prudential Mutual Fund, S Naren has managed flagship schemes like Infrastructure Fund, Discovery Plan and Tax Plan. In his current role, Naren is CIO - Equity and Fixed Income. He is also fund manager of Dynamic and Top 100 Fund.

He has 24 years of experience in broking, project finance, investment banking and fund management. By qualification, he holds a B-Tech degree from IIT Madras and PGDM from IIM Kolkata. In a video interview recently, he shared the following thoughts on 'Value Investing'.

About Value Investing and how it worked in America

Value investing has been something which has worked over the last 60 years in America. It was pioneered by Benjamin Graham and Warren Buffett who was one of the faithful practitioners of the value investing style. Of course, Warren Buffett did look at different modified style of the Benjamin Graham and there have been many other others to the value investing school over the last 50 to 60 years including legendary investors like Seth Klarman and John Neff etc.

Belief about Value Investing in India

Our belief has been that in India also, despite it being a growth economy value investing should work and we have always believed that although the India is a growth market value investing has a good chance of success. Why we believe is because lot of money invested in equities in India is invested with a growth view. By chance a growth stock becomes a value stock people stamped for the lower end of the growth stock and few amount of money which is lying in value products are the only people who can actually buy these stocks at the price decided by the growth investors. You now, while over the last 8 years that we have run the value fund we have always believed that value fund has a big role and we always meet with scepticism because of the fact that India is perceived as a growth market.

How it works – Risk and rewards

The experience of the value funds in the market has been inverse and in our opinion whenever markets are polarized in valuations like 2007 and 2012 they actually have benefited value funds because the value funds avoid the fact which are overvalued like infrastructure in 2007 and the high quality names at this point of time. Of course, value investing carries risk and one of the risk in value investing is that people need to invest for the long term but in our opinion there is very little choice but to invest in value because it is one of the few strategies tested over more than 5 decades in a country like America which also was a growth market and which has also seen periodic big rallies in select sector which value funds are avoided.

( Mutual Fund investments are subject to market risks, read all scheme related documents carefully.)