The Regulator Has Provided Enough Investment Scope: Siddharth Bothra, Motilal Oswal AMC

With the new SEBI norms regarding the categorization of large caps and mid-caps, do you think that mid cap funds have now become too restricted with respect to their investment mandates?

We believe, the SEBI re-categorization has been a key positive for investors on several grounds. Firstly, there is now uniformity on product categories across fund houses, allowing investors to make informed decisions. Secondly, the regulator has provided enough investment universe scope for investment managers to enable them to optimize wealth creation for investors.

Some have been speculating that the new “dumb money” is now flowing into the markets at these valuations on auto pilot via the SIP route, while smarter money is using retail inflows to exit what seems to be a relatively stagnant market. What’s your take on this?

Attempt to time the markets is an exercise in futility in most cases. Most astute investors do not even attempt to do the same. Given how difficult timing the market is, we believe SIP remains a prudent tool to invest in markets, for disciplined long term investors. Investors should take help of investment advisors to be able to choose the right product and categories, to best suit their overall long term requirements. This way they will be able to side step several near term market related hurdles.

Broadly speaking, are you bullish or bearish on large cap stocks at the moment? Specifically, what’s your take on what’s happening on the BFSI and lending front?

The near term market correction has moderated valuations and made many stocks/ sectors attractive. This is the kind of setting most long term investors wish for to be able to invest. We feel the large valuation divergence which was prevalent between large caps and mid-caps, between FY16 to FY18 mid, have now abated significantly. As such we find value across large and mid-caps.

BFSI space continues to be interesting and witnessing huge divergence. There are a select group of players who seem to be winning and becoming more stronger every day, while few other sets of players are continuously losing their ground. We continue to find attractive winning opportunities in few private banks, insurance plays in this segment.

Small caps, on average, have now corrected 40-50% from their Jan ’18 peaks. Do you think we are seeing a structural bottom forming at these levels? Is this a good time to invest into high quality small cap shares?

Small caps had seen significant run ups and outperformance between FY16-FY18. At its peak in FY18 small caps were trading at almost 70% premium to large caps. As such the sharp correction in small caps is not surprising. Nonetheless, despite this sharp correction overall valuations remain above its long term median valuations band. As such it is difficult to say, if they have formed a structural bottom as a category. Though we now see many attractive bottom up stock ideas in this segment.

Give us a few instances of when your “Buy Right, Sit Tight” philosophy has paid off for you in the past year or so, despite the overall range bound nature of the broader markets.

We believe, our investment strategy of buying QGLP (Quality, Growth, Longevity and Price) stocks and ‘Buy Right, Sit Tight’ style allows us to best create long term wealth for our investors. For example in the last one year most of our core BFSI holdings across private banks, insurance companies which account for almost ~45% of some of our portfolios, have given positive returns in the range of 10-25% across many stocks.