Dhimant Shah has over 19 years of experience in stock markets. Prior to joining Principal, he worked as a Fund Manager in HSBC Asset Management (India) Private Ltd. He has also worked with Reliance Capital Asset Management Ltd. (PMS), ASK Raymond James Securities Pvt. Limited and IL&FS Asset Management Co. Pvt. Ltd (now known as UTI Asset Management Company Ltd). He holds a Bachelor of Commerce degree and is a qualified Chartered Accountant.
Could you please elaborate the investment philosophy for the funds you oversee?
The endeavour is to use primary research to find stocks with good growth prospects created by a favourable industry outlook/ company-specific growth initiatives. We follow a process for selecting stocks, the crux of which is to aim for growth at a reasonable price. To do so, there are industry analysis/ competitor reviews/ screeners, etc, performed to identify the target companies and delve deeper into the same.
What is the average holding period for stocks in your portfolio and why?
Our fund’s churn ratio is lower, which conversely reflects a high average holding period. This matches our philosophy of saying that we would like buy stocks cheap and ride the journey of value creation.
Why should investors consider this fund for investment?
I think consistency, returns and overall philosophy should appeal to an investor.
The stock market’s bull-run has been unabated so far this year, with the P/E rising 11.25% to almost 24 in October. Small-cap and mid-cap stocks have been particularly rallying attracting investors to funds that focus on these. Do you think the rally is justified and do you expect it to sustain further?
The answer is not simple. Though some mid-caps and small caps have done well and sustained valuations owing largely to the sustained performance vis-à-vis the larger peer group seen over reasonable periods of comparison, we feel that by and large we can see alternate bouts where typically large caps re-rate and then the mid-caps/ small caps follow.
Many international rating agencies expect the Indian economy to grow by almost 8%. What are your focus sectors/ industries and which ones would you want to avoid?
Our focus sectors are auto, financials, consumer discretionary, auto ancillary, etc, while we would avoid metals, staples and information technology in the near term.
Please share your risk mitigation approach
We have well defined sector/ company limits that allow us a reasonable flexibility to invest while at the same time limit risk from over/ under exposure to specific sectors/ stocks.
Your fund has outperformed the benchmark as well as category averages in the 1-, 3- and 5-year timeframes. What do you attribute its success to ?
We attribute the fund’s consistent outperformance to the processes we follow and the rigorous research that goes with it.
How difficult would it be for you to compete with giants such as HDFC and Franklin in terms of attracting investors?
At Principal India, we are committed in delivering our value proposition to investors through investment performance and service.
What advice would you give to first-time stock market investors? Which funds/ sectors would you suggest for them?
We would suggest at least dabbling in investing before further refining the approach.