Vinit Sambre is a Research Analyst focusing on sectors like Pharmaceuticals, Power Utilities, Chemicals, Fertilizers and Textiles. He is the Co-Fund Manager for DSP Blackrock Micro Cap Fund since June 2010.
Vinit Sambre joined DSPBRIM in July 2007, as Portfolio Analyst for the firm's Portfolio Management Services (PMS) division, which manages discretionary accounts and provides advisory services to institutional clients.
Previously, he was with DSP Merrill Lynch as a part of its Global Private Client business. He spent 20 months at DSP Merrill Lynch as Equity Strategist. Prior to DSP Merrill Lynch, he was employed with IL&FS Investsmart Limited as an Equity Analyst in their PMS division. Prior to that, he has worked with UTI Investment Advisory Services as Equity Analyst for the offshore fund – India Growth Fund. Vinit is a Chartered Accountant from Institute of Chartered Accountant of India (Nov'1997).
In an interview with Advisorkhoj he shared his views on Equity markets, the reforms process initiated by the new Government on the occasion of the launch of DSP Black Rock 3 Years Close Ended Equity Fund.
Congratulations on the launch of your NFO - 3 Years Close Ended Equity Fund. The fund plans to invest primarily in Mid and Small Cap Companies. Therefore, how it is going to be different from your existing fund DSP BlackRock Small and Mid Cap Fund and Micro Cap Fund which are also essentially mid and small cap funds?
Thanks. In case of DSPBR Micro Cap Fund the mandate is to have minimum 65% of the assets invested in the Micro Cap category as per our definition. The new 3 year close ended fund is in a way multi-cap fund with no such restriction on capitalisation. However we would like to focus on small and micro cap category which will form significant portion of the portfolio in case of the new fund as well. Secondly, we would be following a more concentrated approach than DSPBR Micro cap fund with portfolio consisting about 30-35 stocks. However as we are looking to redeem and pay back the investors at the end of 3 year, we may shift a bulk of investments to large cap companies with a view to manage liquidity.
In the last one year we have witnessed huge number of Close Ended fund launches. What is the rationale behind launching a Close Ended Fund?
As a house we do not really subscribe to the close ended architecture. But we have seen huge inflows in DSPBR Micro Cap fund in the last 6-7 months on back of good performance. The general tendency of investors is to chase returns. This creates a perception that the recent flows may be volatile in nature. Further we believe that after the sharp run up in the market the investors will have to display some amount of patience from here onwards to see decent kind of returns. On FY15 earnings estimates the markets are trading on the higher side but if one stretches the time period 3 years ahead then it looks quite reasonable and presents enough opportunities. We are quite optimistic on the equity space and feel that markets over the medium to long term may deliver handsome returns, but one should remain invested in the equities with longer time frame. And, that is why we are looking at close ended structure. In a way it is a forced discipline being imposed on the investors.
We find that the top 5 sectors for DSP Black Rock Small and Mid Cap Fund are Financial, Construction, Technology, Services and automobiles. Are you going to follow the same sector allocation for the Close Ended Fund too? Do you still think more is expected from these sectors?
Currently, we are positive on Financials, Automobiles, Engineering , Healthcare and Agri related sectors.
What are the new sectors which are emerging and yet to catch up with the current run up of the Indian equity markets?
The above sectors as mentioned have done well and seem to possess good potential going forward as well.
Some experts proclaim that this the start of a new secular bull market run (even though the Indian stock market is at life time high) while some are more guarded as they feel this is a hype rally only and soon settle to realistic levels. What is your take on the current market and what do you see as the key drivers for markets in the next three to five years?
Over the next 3-5 years, we see the progress on reforms and improving investment climate to be one of the key drivers for the market. As mentioned earlier with the reform momentum gathering pace we see every year progressively to be a better year in terms of growth. This will also lead to improved sentiment and positive view towards equity as an asset class. The second factor that we are looking at is the interest rates in the economy. As the inflation gets within the comfortable zone we believe RBI will react by bringing down the interest rates which in itself is going to be a major driver. The third key driver is going to be the fund flow itself. As compared to some of the other Emerging Markets, India seems to be better placed with improving growth rates, falling interest rates and stable rupee. This will continue to attract good amount of foreign flows. On the domestic front as well we see retail investors incrementally allocating higher capital towards equities as gold and real estate moves out of favour.
What is the valuation gap between Midcaps vs Large Caps in the current market scenario?
Post the outperformance in the mid-caps recently, the valuation gap has narrowed down significantly. In fact it seems that both are trading at similar multiple. Assuming this trend continues still the mid caps are likely to outperform the large caps due to higher earnings growth.
An analysis of the performances of your schemes – DSPBR TIGER Fund, Micro Cap, Tax Saver and Mid and Small Cap funds – they have given stellar performances so far. Are you proposing any changes in these schemes in keeping tune with the recent market trends? What broadly will be your style and strategy going forward considering the fact that the markets are not cheap?
Broadly the strategy remains the same. We keep taking the top down call depending upon how the things are shaping up and accordingly the sectoral allocations gets decided. Those activities are carried out on an ongoing basis and we actively look at various opportunities across various sectors.
Keeping the current market scenario in mind, what would be your advice to a potential equity mutual fund investor?
We think over the next 3-5 years we will see this unique opportunity where wealth creation through equity asset class is going to be very strong. The last five years have not been so impressive for the equities. We see that reversing now as the growth rates in economy picks up. The retail investor should incrementally look at allocating higher share to equities because we feel that Equity is likely to outperform all the other asset classes in next 3-5 years. The other advice will be to follow strict discipline in terms of equity investment and avoid low quality traps. It is observed that as markets keep rising the tendency is to keep moving down the quality chain. Investors should avoid such pitfalls despite high noise.
Anything else would you like to add for our readers?
If you look at history at DSP BlackRock our fund launch strategy is always in sync with the market requirement. When we feel that there is a need for a particular product, we come out with those kind of products. This time around given that the markets have moved quite a lot the decibel levels are also going up. Money making is becoming very easy in the market. This is the point where alertness levels have to be raised. We feel that investors looking at the long term horizon could see gainful returns from equities. Therefore, the logic of 3 year close ended fund at this point in time makes sense.
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