BoI Multicap completes 3 years with a strong 22% CAGR and a top quartile ranking over the last 1 year.
The fund began its journey with a skew towards mid andsmall caps, but transitioned over the last year towards a large cap tilt, given relative valuations. These moves contributed significantly to alpha.
Stock picks in EPC/capital goods, power equipment, CDMO, domestic pharma and auto ancillaries have been key contributors to alpha over the last 3 years.
Over the last year, increased allocations in auto, consumer durables, consumer services and healthcare have driven alpha. Nitin has also taken profits recently in select auto ancillaries where valuations have got a bit rich for his comfort.
Nitin is increasing exposure in banks, where NIMs have stabilized and credit growth is picking up.
While Nitin is underweight IT services, he says its still early days to conclude whether Indian IT companies will get disrupted by AI or will evolve and become stronger as AI diffusion experts. Meanwhile, they tend to find support when dividend yields move up to 3.5% - 4% levels – which is around where they are at the moment.
While the best opportunities going forward will have tobe discovered bottom-up, sectors like consumer discretionary and financials look good from a top down basis as well.
Nitin is getting incrementally constructive in the smallcaps space but cautions that it might still be difficult to put together a portfolio of 50-60 small cap names with high conviction. This is where a multicap strategy works well for investors.