What has resulted in the fund’s superior improved performance?
Earlier the fund focused on marco and top-down calls, which later moved to a bottom-up approach. Now, the fund focuses on identifying good businesses with Economic Moat around them which can give them competitive advantage over others. This realignment towards buying quality business at reasonable price has resulted in consistent performance.
What investment approach is adopted by this fund?
The fund follows a bottom-up approach to investing. Decision of stock selection involves in-depth research not made simply based on meeting the top level management. Our Investments team also meets the company’s various stake holders (staff, middle level managers, company vendors and all other stake holders) – to gather a 360 degree view. In other words we do a ground level research on companies before adding to the portfolio – review of competition, market share, and perception of company’s product, solutions provided by the company to consumers, percentage of revenue the company spends on R&D or simply a 360 degree channel check.
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What is the composition of the fund and stock selecting? What kind of stocks and sectors do you avoid?
The investment philosophy of the fund is to always invest in quality companies. Quality orientation involves selecting companies run by professional managements which have strong promoters, adhere to corporate governance, spend sizeable amount of revenue on R&D, predictability of earnings, companies which have strong moat. Integration of ESG (Environmental, Social & Governance) factors into investment analysis and portfolio construction is practiced on a regular basis. While investing we try to avoid buying companies that have excessive business uncertainty.
What bets have worked in the past one year?
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Over a period of time we had taken good exposure to select Auto and Auto Ancillaries, Banking & financial, Cement, Capital Goods, Media, Crop Protection, Pharma stocks and these again were more bottom-up and conviction backed. We could find winners in most of the sectors and these companies have delivered consistent returns over last few years.
How do you see the Corporate earnings and where the growth will come from?
The recent quarterly earnings were better than expected and we believe the good resilience shown in this quarter and the positive management commentary gives a clear guidance towards corporate earnings improving. As GST gets implemented over FY18 we will see further boost to GDP growth and corporate earnings improving especially for companies in the organized sector resulting in market share enhancement and earnings improvement of companies in the listed space. The longer term growth drivers are in place with structural reforms and political willingness towards creating a more inclusive economic growth and we feel over 5-10 years, earnings have a potential of compounding between 15-18 per cent CAGR.
Who should invest in this fund? And what should they expect?
BSL Tax Relief’96 has had a successful run for over two decades now, helping investors create substantial wealth, especially for the ones who remained loyal with it through its journey. The 3-year lock-in plays an important role on the investment style of the fund. This enables the Fund Manager to take medium to long term view on stocks of emerging quality companies and helps to invest in early stages. Investors with medium to longer term horizon with a belief of investing in quality franchise that compound over time should consider BSL Tax Relief 96. This being an ELSS fund the investor also has opportunity to save on Tax under 80C.
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