Ajay believes a broad based equity market rally is not yet the base case – for that to happen, we need nominal GDP growth to accelerate from 10% levels to 12% levels.
Meanwhile, his decision to focus on finding growth pockets and businesses that are at the cusp of a scale up or at an inflection point – without worrying too much about a top down view – continues to deliver strong performance in MO’s Large & Midcap Fund and the more recently launched 18 month old Small Cap Fund.
He is a strong believer in innovation led inflection points as the key filter for his stock picking. More of the same does not appeal to him – businesses that are doing different things or doing things differently is what he primarily spends lot of his time on, to understand which ones are ready for a growth lift-off.
While the range of funds he manages/co-manages span the entire cap spectrum (large, mid, small, large & mid, flexicap), not all are delivering robust performances. Cases in point on underperformance are MO’s Flexicap and Midcap funds.
Flexicap has started turning around but MO’s Midcap fund has yet to exhibit similar signs. Ajay says a larger exposure to IT services has been a key factor dragging down the Midcap fund’s performance – markets he believes are irrationally dumping all IT services – even the ones with stronger growth profiles.
With IT services weight now normalized and some other stock overweights now right-sized, Ajay is confident that the current portfolio is in good shape to start outperforming and building back a sound performance track record.