In an interview with ETMarkets, Sharma said: “Investors should keep an eye on earnings surprises and sectoral shifts—because in this market, the real master is agility, not just earnings” Edited excerpts:Please take us through the performance of Equity Plus scheme and Debt Plus – both beat the benchmark last month.
Both the Equity Plus and Debt Plus schemes have demonstrated robust performance, consistently beating their respective benchmarks in recent months.
• Equity Plus Scheme: This scheme invests in a portfolio of blue-chip stocks, primarily those that form the NIFTY50. Last month, the Equity Plus scheme returned 4.65%, while the NIFTY50 returned 3.92%, resulting in an alpha of 0.73%.
The strategy focuses on generating alpha during both rising and falling markets through sophisticated derivative and hedging strategies, ensuring stability and protection against market downturns.• Debt Plus Scheme: Focused on AAA-rated government and fixed-income securities, the Debt Plus scheme aims to provide stable returns with minimal risk.Last month, the Debt Plus scheme generated a return of 1.40%, outperforming the benchmark CRISIL Short Term Bond Index, which returned 0.69%.The scheme employs proprietary alpha models to enhance returns by leveraging the stable nature of debt instruments while minimizing market volatility.
Please take us through the investment methodology of both the funds?
Equity Plus Fund: This fund uses a combination of blue-chip equity investments and derivative strategies to generate consistent alpha. The core of the investment methodology is to replicate the performance of the NIFTY50 while employing a proprietary alpha generation model that focuses on market-neutral strategies.
The fund uses techniques like index modeling (to identify mispriced options) and momentum strategies (to capitalize on short-term price movements) to outperform the benchmark consistently.
• Debt Plus Fund: The investment methodology for the Debt Plus fund centers around high-quality, AAA-rated debt securities, which provide a stable return base.
The fund further utilizes a low-risk alpha strategy by pledging these debt securities to derive margin and deploying proprietary models to generate additional returns. The focus is on maintaining a market-neutral stance with minimal correlation to market movements, ensuring stability and steady compounding of returns over time
How do you pick stocks for the Equity Plus scheme?
Our investment philosophy is grounded in the belief that, over the long term, individual stock picking may deliver less consistent returns compared to the broader market.
As such, we invest exclusively in NIFTY 50 companies, utilizing the NIFTY 50 index as our underlying benchmark. This strategy aligns with our focus on providing stable, diversified exposure to India’s leading companies, aiming to achieve reliable and consistent returns for our investors.
How Debt Plus scheme help in generating stable monthly returns — can it be a good scheme for investors who are nearing retirement?
A) The Debt Plus scheme is particularly suited for investors nearing retirement due to its focus on stable, low-risk returns.
• Stability: The fund invests in AAA-rated government securities and high-grade debt instruments, which are traditionally less volatile and provide predictable income streams.
• Monthly Returns: The fund’s approach to pledging securities for margin allows for a modest but steady enhancement of returns through market-neutral alpha strategies. This ensures consistent monthly compounding, making it an attractive option for those who prioritize capital preservation and regular income.
• Suitability for Near-Retirement Investors: The Debt Plus scheme focuses on investing in high-quality, AAA-rated debt instruments, which provide stability and predictable income—key priorities for those approaching retirement.
This scheme’s low-risk profile makes it suitable for investors looking to preserve their capital while generating steady returns. Additionally, the scheme employs market-neutral strategies to enhance returns without significantly increasing risk, offering a balanced approach to income generation.
• For individuals nearing retirement, where capital preservation and stable income are crucial, the Debt Plus scheme’s conservative investment strategy, combined with its focus on high-quality debt instruments, makes it an attractive choice.
The fund has generated a gross alpha return of 13% annually since inception, through investments in the bluest of blue chip companies. How much money investors would have made if they invested Rs 50 lakh in the NFO period?
A) Launch Date: The fund was launched in 2019.
• Investor Returns: If an investor had invested ₹50 lakh during the New Fund Offer (NFO) period in 2019, the investment would have grown to approximately ₹1.34(Net) / ₹1.76(Gross) crore since inception.
This significant growth underscores the fund’s ability to deliver substantial returns through a combination of blue-chip equity exposure and derivative strategies.
For the benefit of our readers, can you explain what a Long Short Fund is?
Certainly. A Long-Short Fund is an investment strategy that allows us to take advantage of opportunities in both rising and falling markets. Here’s how it works:
On the ‘long’ side, we invest in stocks we believe will increase in value. These are companies with strong fundamentals or growth potential that we expect to perform well over time.
On the ‘short’ side, we take positions in stocks we think are overvalued or likely to decline in price. By borrowing these stocks and selling them at the current price, we aim to buy them back at a lower price in the future, capturing the difference as profit.
The main advantage of a Long-Short Fund is flexibility. It provides the ability to generate returns in different market conditions, not just when markets are going up. By balancing long and short positions, we aim to reduce overall portfolio risk and enhance returns, making it a versatile tool for navigating various market environments.
Nifty@25000 – what is your view on markets? Does it make you cautious or bullish at current levels?
A) As Nifty approaches 25,000, our stance is a balanced one—both cautious and selectively bullish. On the one hand, we recognize the strong momentum driven by robust corporate earnings, economic recovery, and sustained foreign inflows.
Sectors like financials, IT, and infrastructure are showing solid fundamentals, which supports a bullish outlook.
However, we also remain vigilant. With valuations at elevated levels, any global macroeconomic shifts—like interest rate changes or geopolitical tensions—could introduce volatility.
So, while we are optimistic about the market’s potential, we are equally focused on managing risk. It’s about being cautiously bullish—positioning ourselves to capitalize on growth opportunities while safeguarding against potential downside risks.
Which sectors will lead the next leg of the bull run in equity markets?
Looking ahead, I believe a few key sectors will drive the next phase of growth. Financial Services stand out, with strong credit growth and improving asset quality—banks and NBFCs are well-positioned, especially as digital banking continues to evolve. We’re seeing a solid 15-17% increase in credit year-over-year, and this momentum is likely to sustain.
Infrastructure and Capital Goods are also set to benefit significantly. The government’s focus on infrastructure development is clear with the substantial increase in budget allocations. Companies involved in this space are primed to capitalize on the surge in public and private investment.
IT and Digital Services remain a strong play. Even amidst global uncertainties, the demand for digital solutions like cloud, AI, and cybersecurity is robust. India’s IT sector, given its expertise and competitive edge, is likely to continue performing well.
Finally, Renewable Energy is a sector I’m particularly optimistic about. With India’s commitment to renewable targets, companies innovating in solar, wind, and EV technologies are poised for growth.
This is not just a trend but a long-term structural shift that aligns with global sustainability goals.
In today’s market, these sectors have the right mix of resilience and growth potential to lead the bull run. But, of course, our strategy remains flexible—we’re always prepared to pivot as the market dynamics evolve.
Theory says that the market is a slave of earnings. How do you see performance of India Inc. for the rest of FY25?
“Indeed, as the saying goes, ‘The market is a slave to earnings,’ and India Inc. is no exception. As we look ahead to the rest of FY25, the performance of Indian companies is poised to reflect a nuanced blend of resilience and opportunity.
Data paints an encouraging picture: Despite global uncertainties, India’s corporate earnings have been buoyed by robust domestic consumption, a favorable demographic dividend, and strategic government policies.
For the first half of FY25, we’ve seen a median earnings growth of 15% across key sectors like technology, pharmaceuticals, and consumer goods.
The manufacturing sector, bolstered by the government’s push towards self-reliance (Atmanirbhar Bharat), is also showing strong signs of recovery with an average earnings uptick of 12% year-on-year.
But here’s where it gets interesting—with inflationary pressures stabilizing and the Reserve Bank of India’s cautious stance on interest rates, sectors such as financial services and consumer durables are likely to continue their upward trajectory.
Analysts are projecting a 20-25% earnings growth for well-capitalized banks, thanks to healthy credit growth and improving asset quality.
On the flip side, export-oriented sectors like IT and textiles may face headwinds due to global economic slowdowns, potentially compressing margins.
However, strong demand for digital transformation and the weaker rupee could still support decent growth rates of around 8-10%.
In summary, while the market may indeed be a ‘slave’ to earnings, it’s also a student of resilience and adaptation. India Inc., with its diverse economic tapestry, is well-positioned to navigate the choppy waters ahead.
Investors should keep an eye on earnings surprises and sectoral shifts—because in this market, the real master is agility, not just earnings.”
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)