Outlining the investment strategy of the fund, Associate Fund Manager Nilesh Shetty said the fund had raised its cash level to as high as 32 percent last year but that has now come down to about 5 percent recently after the market fell about 20 percent from the top.
Quantum is one of the few asset managers in the country that actively takes cash calls on the basis of how comfortable fund managers are with stock valuations — a risk-prone strategy that appears to have worked out well so far for its flagship fund.
Below is the verbatim transcript of Nilesh Shetty’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Anuj: What is your portfolio approach now? We have seen a big rally, almost 10 percent rally from the lows. Is it time to accumulate more stocks or is it time to raise cash levels considering the kind of market we were in before the Budget?
A: We were quite pessimistic early first half last year and our cash level in the fund went up to almost 32 percent. Since then once the correction has started in May, we have been aggressively buying into stocks; stock that we believe were attractive. It’s a stock specific strategy; it’s not a sectoral approach.
However, post that by the end of February, our cash level drop to less than 5 percent and our sense is if the market slips below the level that we saw in February, our cash level could drop less than 1 percent. Therefore, if you want to build a long-term portfolio, it’s a great time to go out and buy stocks at level that you feel comfortable.
Ekta: In terms of stocks, if you are comfortable in terms of buying them, which sector at least would you possibly approach?
A: The stocks that have come into the portfolio have come from the banking space, some engineering companies as well as pharmaceutical companies. We have not had allocation to pharma for last five years now and recently a pharma stock came into the portfolio purely on valuations.
Ekta: A follow-up – within banking would it be a mix of public sector undertaking (PSU)- private, would it largely be private or maybe largely PSU based on valuations? What is it made up of?
A: In PSU banks, we do not like to go below the largest player because we are not comfortable with the balance sheets of a lot of these PSU banks, so primarily our tilt has always been towards private sector banks and this time the largest fear on the PSU side as well as few private players have come into the portfolio.