The fund focuses on companies that have strong domestic demand and balance sheets
Though it never had a smooth ride, it's one of the better players in this category. After an uneventful start spanning over five years, it began to get noticed in 2006, when Ravuri assumed charge. It turned out to be a category outperformer over the following years, barring a disappointing 2009.
Last year, his overcautious stance made it a third-quartile category underperformer. The suddenness of the recovery caught Ravuri off guard. Despite the equity market starting its upward journey in March 2009, the fund did not lower exposure to defensive sectors (Healthcare and FMCG). Besides Tisco or Infosys, he barely ventured into Metals or IT. To add to it, the fund held on to a cash position way into July 2009. "Three factors went against me," he explains. "A cash call from late 2008, being underweight in RIL and positioning my portfolio defensively." Typical to the fund house, he focussed on companies that depended on domestic demand with strong balance sheets. "Commodities are extremely volatile and prices were dependent on economies in Europe and China. In IT, I was wary of exposures to companies that got bulk of their revenues from the global financial services sector." He also avoided companies that were highly leveraged. "My objective is not to latch on to companies that will go bankrupt in the hope that they will turn around and make money," he says. His play-it-safe attitude backfired in 2009 but the current -year YTD returns show that he stands vindicated.
In his search for good fundamentals, he often bets on sectors against the current tide. In 2006, his peers were neutral towards Healthcare while he increased allocation to it on the back of concentrated bets in Sun Pharma and Divi's Laboratories. Similarly, he pruned allocation to Financial Services while increasing it to Automobiles. In 2007, the fund was more into Healthcare and Basic-Engineering while others chased Metals. As the category as a whole increased exposure to diversified companies, he moved out. The similar pattern followed in 2008. Even some of his stock picks stand out for the lack of popularity when they initially made an appearance in the portfolio; such as C&C Constructions, Solar Industries, Ahmednagar Forgings, KNR Constructions, Emico Elecon (India) and Technocraft Industries India. Recently, he has been trimming exposure to mid caps and has booked profits.
