Mirae Asset India Opportunities Fund bagged the Morningstar Fund Award 2018 in Best Large-Cap Equity Fund category, beating ICICI Prudential Nifty Next 50 Index and SBI Blue Chip.
Despite the fund being launched in the midst of the global financial crisis of 2008, it has generated steady returns across all market cycles and emerged as a consistent first-quartile performer by beating most of its peers by a wide margin.
Neelesh Surana, CIO of Equities at Mirae Asset Global Investments (India), chats with Morningstar about his investment thesis.
What will you attribute the relatively superior performance of your fund across market cycles?
Disciplined approach to investing, with focus on “quality up to a reasonable price”, has helped us deliver a satisfactory track record. Our attribution analysis suggests that at an aggregate level, large part of the alpha generation has been from stock selection.
There are prolonged periods when the market does not behave as per your expectations. How do you handle situations when you are caught on the wrong foot?
We work on the assumption that in the long-term “price” and “value” would converge – however, there could be prolonged periods of divergence, and as long-term investors we need to hold patiently. On the other hand, there could be situations when ‘value’ of the business itself could change either on account of changing dynamics of industry or our assumptions could be wrong –in such cases, corrective actions are needed to switch to better stocks.
The fund has an overweight position in the financial sector. What is your overall view on the sector and how would the Punjab National Bank scam change the dynamics for Non-Banking Finance Companies and private banks?
Within financials, we continue to prefer well-managed private sector banks, given the secular opportunity to improve market share both on the liability as well as the asset-side. In the current scenario of sub-optimal credit growth and challenges on non-performing assets, or, NPAs, private banks are gaining share. While private banks are core holdings across portfolios, we do have exposure to corporates lenders, valuation of which should revert to mean, as NPA cycle normalises.
Do you see sentiments affecting inflows in equity funds after the re-introduction of long-term capital gains tax?
Investors would accept the take long-term capital gain, which would roughly shave off about 1-1.25% gains, but prospectively. While lack of indexation benefit is negative, the grandfathering clause that accompanies this proposal will prevent knee-jerk reaction to flows.
What is your advice to investors? Which categories of equity funds would you recommend investors?
We would advise to invest in a disciplined way in equities for long-term, within the earmarked asset allocation. We believe that a large portion (say 75%+) should be allocated to multi-cap funds.
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