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Apr 16, 2013, 05.46 PM IST | Source: CNBC-TV18

'MOSt Focused 25 Fund' will play purely on equity: Badshah

Motilal Oswal AMC launches a new fund which will focus purely on equity. It is called the ‘MOSt Focused 25 Fund’. Taher Badshah, Motilal Oswal said, "It is a more bottom up oriented best ideas kind of portfolio. The portfolio will comprise to a maximum of 25 stocks."

Taher Badshah

Fund Manager, Motilal Oswal AMC

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Motilal Oswal AMC launches a new fund which will focus purely on equity. It is called the ‘MOSt Focused 25 Fund’

Taher Badshah, Motilal Oswal said, “It is a more bottom up oriented best ideas kind of portfolio. The portfolio will comprise to a maximum of 25 stocks."

In terms of the portfolio construct, Badshah added, “We will have a largercap bias but the fund allows us to invest upto a maximum of 25 percent in midcap stocks which are below the top 200 stocks on the exchanges”

Also read: Banking sector results preview for Q4FY13 says Motilal Oswal

He further added that they will be looking to buy businesses from a medium to long-term perspective with an investment horizon of three-five years.

Commenting on the market outlook, he said, “We are at a stage of the market, which is looking reasonably positive to us. Probably in the next 12-18 months, we believe that the conditions for corporate profitability to recover will gradually fall into place,”

Below is the verbatim transcript of his interview on CNBC-TV18

Q: You have existing funds; you have equity funds, what is the reason for yet another fund?

A: There are two reasons for having a new fund. We have few schemes and funds on our mutual fund platform. We have typically been associated more with the exchange traded fund (ETF) platform and active/passive combination products till now. So, this new fund is our first product that we now have on pure equity side. It is the more plain vanilla variety that we are all familiar with.

We are calling it the 'MOSt Focused 25 Fund' and it is maiden launch in this area. That is one reason from a corporate perspective and a business perspective.

Secondly, we think that while there is a lot of general apathy towards equities and asset class in recent years, we believe that the scenario is getting better. We believe that it is one of the better times than many others to invest in equities from the perspective of investors who are oriented towards momentum growth medium-term to long-term growth.

Our portfolio is designed for investors who are medium-term to long-term growth oriented. From that perspective, we believe that markets from the current situation with our strategy should be in a position to get returns.

Q: What is going to be a big market call then? Today, and in the last couple of days we have seen a bit of a shift from defensives to slightly more aggressive ones, we have seen buying in banking, we have seen buying in infrastructure, what is your big portfolio call going forward for the stock markets?

A: It is a more bottom up oriented best ideas kind of portfolio. As we are calling it the MOSt Focused 25 Fund, so, the portfolio will comprise off only maximum of 25 stocks.

We are basically looking to buy businesses from a medium-term to long-term perspective and our investment horizon is more like three-five years. Therefore, it is not as much dependent only upon current market conditions.

Q: At current juncture what is your broader call on the market?

A: My outlook is that we are at a stage of the market which is looking reasonably positive to us. Even if one were to probably look at in the next 12-18 months, we believe that many of the conditions for corporate profitability to recover, is now gradually falling into place. Especially given the kind of correction that we have seen in commodity prices, some of the other asset classes, the shift towards equities in our view will gradually come about from the current situation where there is complete aversion. So, appetite for equities will improve and that will also drive flows and also drive market.

Clearly, the most important thing will be the return of corporate profitability. We have seen a situation of very low growth in the last two-three years.  However, we are setting up the building blocks for growth to recover maybe not in the next two quarters but clearly over the next two years time. So, if one is positioned for that then the market is trading at a very attractive valuation today.

Q: I cannot expect you to reveal your portfolio as soon as you get your corpus but could you give broad contours on what you will bet on and will that include midcap stocks because your presentation says that you will benchmark yourself to the Nifty. Will you be largely heavy big stocks weighted, will there be any scope for debt as well?

A: In terms of the portfolio construct, we will have a largercap bias but the fund allows us to invest in midcap companies also to a fairly decent extent. Upto a maximum of 25 percent can be in midcap stocks which are below the top 200 stocks on the exchanges. We can create a portfolio with a fairly balanced strategy but it will clearly have a largecap bias to begin with.

In terms of our positioning of the fund, basically it is more about seeking companies which we think have certain competitive advantages.

Q: Which kind of stocks?

A: It can come from various sectors, we are sector agnostic. Essentially, we will look to buy companies, which have got leadership in their area. It could even be in the infrastructure play, it could be in the cyclical play or it could be in the consumer facing businesses, which demonstrate a lot of these characteristics. It could come out of any sector but for us it is more about enduring long-term competitive advantages, which can play out over three-five years time.

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