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Learning From The Past Mistakes
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But Agrawal and Surana were quick to learn and reconstruct their entire portfolio: in three years, their flagship fund became the No. 1 in its category. In the past three years, the fund has recorded a return of 35.38 per cent to be adjudged the Businessworld-Value Research study's Best Large and Mid Cap Fund for 2011-12. This is the first time that the fund has featured in the list of nominees for best fund.
"The reason for the success has been us keeping it simple and getting into stocks that generated free cash flows of over Rs 100 crore and with a market cap of over Rs 4,000 crore," says Surana, head-equity at Mirae Asset. Apart from the clean-up act, Agrawal and Surana stayed away from capital-starved companies and never deviated more than 2 to 3 per cent away from the benchmark in any sector.
At any given point, 70 per cent of stocks in the fund's portfolio are part of the benchmark. However, what worked for them was their ability to identify leaders earlier than their competitors. "In the past four years, the market condition has been similar across the globe. The rallies have been skewed and players have been chasing leaders. We were early in identifying those winners within the sectors," says Agrawal.
The result: distributors don't have to push the fund onto investors, it sells on merit. The number of investors in the fund has risen to 67,000, compared to 35,000 at the time of the NFO.
In the past 12-18 months, the managers' biggest regret is they weren't able to book profits in certain stocks at their peak. Says Surana, "It's not that we weren't underweight on the energy and commodity sectors but we could have been in positive territory if we had exited early." In FY2012, the fund has delivered a negative return of 2.79 per cent, compared to its benchmark-BSE 200 — that fell close to 9.5 per cent. In the same period, the BSE Sensex lost 10.5 per cent.
"We will continue to keep our focus on services and consumption sector and avoid infra. We have already increased exposure to pharmaceuticals and telecom while reducing it in petroleum products," says Surana.
(This story was published in Businessworld Issue Dated 30-04-2012)