‘Domain
of small-caps still under-researched’
-- Mr R Rajagopal, CIO,
DBS Cholamandalam MF
“We
believe the domain of
small-cap stocks is still
under-researched compared
to its mid-cap and large-cap
counterparts”, says
Mr R Rajagopal, CIO, DBS
Cholamandalam MF. This,
he tells SKP Securities,
presents an opportunity
for capital appreciation.
The fund house currently
manages a range of equity
products, including one
that is chiefly focused
on large-caps.
Excerpts from an interview.
How
diversified will be the
portfolio of the new fund?
The
small cap index has representation
from nearly 40 sectors.
Hence it will offer sufficient
scope to remain diversified
across sectors. The portfolio
that we have in mind would
have approx 40-60 stocks
at any point of time.
What sort of small/mid-cap
exposure does DBS Chola
MF already have in other
equity funds?
In
our multi-cap product,
we have 15-35% exposure
to mid- and small-cap
stocks. In the other schemes,
this stands in the range
of 5-15%. We would definitely
invest in the stocks that
we already hold as we
have done the necessary
due diligence on these.
But we would also look
at identifying new potential
winners so as to diversify
our holdings and achieve
the stated investment
objectives.
"More money
is chasing small caps
than ever before. However,
this does not entirely
eliminate risks".
Do you agree with that
statement?
What
we believe is this: money
is chasing value. Some
of the companies in the
small-cap space operate
in niche areas. Not all
of these are available
for investing when you
consider large- or mid-cap
names. A niche business
can have the potential
for delivering phenomenal
growth over longer duration.
Risks are inherent in
the small-cap space when
you see things from the
point of liquidity and
volatility. However, over
a period of time, risk-adjusted
returns have been superior
on a case-to-case basis.
Small
/ mid-caps have been discovered
quite well, while their
valuations have scaled
up significantly. How
do you perceive this trend?
We
believe the domain of
small-cap stocks is still
under-researched compared
to its mid-cap and large-cap
counterparts. Now, this
presents an opportunity
for capital appreciation.
The majority of broking
outfits still concentrate
on large- and mid-cap
companies. Mind you, valuations
have scaled up but that
is more on account of
expected growth. If companies
continue to deliver as
per expectation, the potential
for further upside still
remains. Again, we are
referring to instances
on a case-to-case basis.
EOM
====================================================
Sundaram BNP Paribas Energy
Opportunities Fund
will focus on the changing
dynamics in the energy sector,
Mr S Krishnakumar, fund
manager, Sundaram BNP Paribas
MF, tells SKP Securities
in an interview.
Excerpts.
How
will the NFO be positioned
in the context of increasng
demand for energy and other
macro factors?
Well,
the offer is positioned
to take advantage of opportunities
emerging from multiple triggers
in the country’s energy
sector. These stem from
oil & gas exploration,
production and distribution.
Some of the important factors
are: availability of abundant
oil & gas and gas-based
power, free pricing of power
(which will lead to RoE
expansion), captive coal
mining flexibility for users
in power, steel and cement,
and lastly, renewable energy.
Triggers include nuclear
power and oil refining &
marketing. The fund will
focus on companies that
benefit from widespread
emerging opportunities in
the energy space. The portfolio
would be more diversified
than a sector fund and positioned
to deliver returns commensurate
with risk.
To
what extent can it accommodate
stocks from sectors that
are not typically related
to energy?
As
a thematic fund, it will
play the energy theme (with
multiple triggers) in an
end-to-end manner -- producers
to beneficiaries. There
are three categories of
players in the investment
universe. The fund can invest
in:
*
Direct resource providers,
which include oil &
gas, power and alternate
sources of energy
*
Enablers who will own the
transmission infrastructure,
gas stations and engineering
& logistics
*
Beneficiaries or users in
energy-intensive sectors
Apart
from the energy universe,
the fund has the flexibility
to invest up to 35% in stocks
other than the targeted
sector and theme.
How
has its benchmark index
performed in recent times?
The
benchmark for the fund is
BSE Oil & Gas Index.
This comprises only 9 stocks,
with ONGC and Reliance accounting
for 80 per cent. The fund
can invest only up to 10
% of its assets in a single
stock. The index has delivered
a return of 90 per cent
during the past one year
and 52 per cent during the
past six months. The price
movement of Reliance influences
this return significantly
as it accounts for 62 per
cent in the portfolio.
What
are the risks that investors
should be acutely aware
of?
Investors
should be aware of factors
like possible delays and
slower pace of commercialization
of gas and oil finds as
well as the possibility
of significantly lower commercial
output in relation to the
size of the oil or gas discovery.
Besides, there could be
regulatory hurdles. Remember,
this fund would be suitable
only for investors with
a high-risk appetite.
On
what sectors are your funds
over-weight / under-weight
at the moment?
We
are over-weight on engineering,
metals and financial services
and under-weight on IT.
Oil & gas and power
stocks account for about
11 per cent of the assets
across all our funds.
EOM
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