WF : Ajay, can you share with us what are in your view the key success factors that have enabled the fantastic performance of your fund. It is not very often that a fund manager can lay claim to managing the best equity fund in the world and you do have that distinction. So what are in your view the key drivers that have helped in that kind of a performance?

Ajay: Basically what has helped to succeed in terms of performance for the investors and for the fund, the key driver has been remaining focused and trying to foresee what is going to happen next rather than worry too much about the present situation. To give an example last year we all had gone through a very bad time but if you were to or anyone had to analyze the last year situation, it was more of a global problem. Last year, we were underweight on stocks and sectors that had a strong global correlation and companies whose business would be impacted by the global meltdown.

This year, just prior to the Indian elections time,  we took a call that there will be a global recovery, considering the efforts of all the G20 countries and that things are going to look at least better than what were seen in the past.  That is when the fund slowly and gradually increased exposure to the globally correlated stocks – largely in the commodities space. The fund is now overweight on commodity and continues to be  market neutral weight on software.

WF : Do you continue to maintain the overweight stance on commodities now or are you beginning to trim that exposure?

Ajay: I would like to continue the overweight stand as I feel that the globally we are still  in the process of recovering. I believe in the next 6 to 9 months,  things will be better than what people have been anticipating.

One more thing I would like to add is that the philosophy while running this fund is very different from the others. When I buy a stock or when I am getting exposed to a stock,  the idea is to enter such stocks to own them for the long term rather than to make trading gains or sell them with a 10 -15 or 20 % margin.

WF:  Does that also mean that you don’t take as much active cash calls in this fund as the other open ended funs might do?

Ajay: I don’t. If I have to look back at the last financial year, I’ve seen some funds take even upto 40% cash levels. Our internal rules don’t permit such levels of cash. The assumption is that growth will resume at some point and therefore the fund must be positioned for it. That’s what happened, as we all saw.

We also focus on maintaining a well diversified portfolio as it helps manage risks better.

WF: Practically speaking, how different is it to manage a 3 year lock in product like ELSS schemes versus open ended funds? Do customers really benefit from a long term investing approach in ELSS funds?

Ajay: The biggest benefit is the discipline that the investor comes with when he invests in an ELSS product. The investor is mentally prepared with a long term investment horizon.  The fund manager does not have to fight inflow-outflow problems like you see in open ended funds.

It is just like what you or someone puts into PPF or long term saving products. So he is mentally prepared for investing for at least 3 years, which is the lock in period. So the investor is prepared , the fund manager is prepared, so he can enter without having much burden on his head not thinking much of the inflows and outflows.

WF: What is your outlook on the markets going ahead, Ajay?

Ajay: We should be making an all time high very soon.

WF : That is music to a lot of ears! Which are the sectors that you would maintain an overweight stance at this time. Commodities is one you mentioned.

Ajay: Commodities especially materials. The fund is still maintaining an overweight position. Based on the overall portfolio weight, I may be trimming some positions at some point of time.

I am bullish on Liquor. First it will be hospitality industry which will include hotels than liquor. I also believe that airlines is a sector that can turn around.

WF: Which are the sectors you would be cautious about this time? Are there any sectors which are too richly valued for your liking?

Ajay: I would probably say that all sectors should benefit from the global recovery and from India’s growth story.

WF:  And if you were to put your finger on 1 or 2 risk factors to this entire growth story, what would you watch out for in terms of what could go wrong?

Ajay:  The disturbing news what can come in is on the currency front it can be on the global front if CDS spread on few of the corporates rise sharply or disturbing news can be that of banks needing more capital.

WF: Like what happened in UK?

Ajay: Yes. Having said that, these issues seem to have been discounted in the market.