ITI MF’s new Business Cycles Fund aims to leverage its stock picking skills and add a sectoral overlay with a view to identifying sectors witnessing an inflection point in earnings growth momentum.
The key for Nilay is identifying likely delta in earningsgrowth momentum which has not yet been fully appreciated by the market.
Sector and stock selection will be style agnostic asstyles are also largely influenced by the stage of the cycle that the economyis witnessing.
The fund can go as high as 8-10% +/- at a sector level vsbenchmark, to ensure that the fund remains true to label as a business cyclesfocused fund.
Expect a top quartile active share vs peers from this new fund. The fund will likely have 55-60 stocks with a portfolio turnover ratio of around 70%. Nilay says sector cycles usually last 18 months – give or take a few. The portfolio will therefore likely look very different every 18 months.
Sectors in focus for Nilay now include financials,discretionary consumption and select industrials. Two specific sub-sectors helikes now include large hospital chains and power utilities.
Expect the initial portfolio to be significantlyunderweight consumer staples (large FMCG companies) and large cap IT servicesstocks.