Strong fundamentals, liquidity and a prudent management are the three things that attract LIC Mutual Fund's assistant general manager, finance, Nagendra Singh to a stock.
He takes a call only if he is convinced about all of these three factors. It's the sector that Singh has to be upbeat about before he finally decides on the stocks he has to buy. Once stocks are added in the portfolio, Singh prefers to hold them at least for a quarter to check out the financial performance.
Depending on the kind of growth reported by the company, the holding period is reviewed. He keeps a certain profit target in the mind too.
Singh gives a lot of importance to frequent talks with the management. He feels that helps immensely in judging the company. He compares the management's perspective on the numbers that they plan to deliver and what they deliver actually.
"Sometimes managers are aggressive and project ambitious growth which they might not be able to deliver. Then it becomes a reference point in the future to avoid such companies," he explains.
Singh likes front liners. "If you were not invested in large-caps, you would not have been able to gain in the last rally. In this rally, it is only the front liners that have really taken off. Now, valuations may seem a bit stretched," he says.
But he believes that they are not expensive as the encouraging last quarter numbers corroborate. "There are further chances of appreciation if the companies post the same kind of growth in the next quarters," feels Singh.
But he loves mid-caps and small-caps too. He feels you cannot ignore them, as they have a lot of scope to grow. "Over time, it is these mid-caps and small-caps that grow into large-caps," he opines.
His faith in mid-caps is so strong that he continues holding them even after having burnt his fingers in the last rally. "People were waiting for them to rise, but they did not really catch up well," he says. But he states with a lot of conviction, "I am sure they will perform in the next rally."
Singh is very positive on infrastructure, capital goods, banking and to an extent on information technology, which he feels should do well due to macro-economic factors.
But does that mean he is shunning other sectors completely? Not really. "In this bull market, the movement has happened across all sectors. It is just that there are some leaders and some laggards like textiles and fertilisers. We want to concentrate on the leaders given the state of the economy and the numbers posted by the companies," says Singh.
At the current market levels, Singh feels that there is some need to be cautious. However, he is very bullish about the markets in the long term.
"I am very positive going forward as I believe, most of the issues like interest rates, oil prices and appreciating rupee have been addressed," says Singh.
He is a great believer in the India growth story. Singh believes there should be no reason we should be lagging behind when we talk about a growth rate of 8 per cent.
But according to Singh, investors should look at the market at least from a three year perspective wherein they can expect around 20 per cent returns annually.
Says he, "If you take a long term call, there is nothing to worry. Markets will rally with some intermittent corrections. Any major fall is just another opportunity to enter the markets and any major rise is a good time to book profits partially."
To manage their investments better, he strongly recommends investors to invest only through mutual funds. However, his strong advice to investors is to look at markets, only with an investment perspective. "If you try to trade, you will be caught on the wrong foot," he warns.
'Cautious longer calls' is Singh's recommendation.
Since completing his MBA in 1995, this 39-year old has been working in the investment department of LIC Mutual Fund. He likes what he does and wants to continue doing it even after his retirement. He wants to become a financial advisor post retirement.
Investing is something he is really zealous about. He is so devoted to it that he has no time for other pursuits. Even in his spare time he prefers reading financial newspapers and magazines to better his investment decisions.
Yet when you ask him how he manages market highs and lows, he seems baffled. "That is something really difficult to answer," he says. "During highs, I become very cautious and go slow," he says.
He tries to pick up undervalued stocks or those stocks that have not surged much as they would not plummet much. He chooses to book profits on stock that gain more than 30-35 per cent and then re-enter on corrections.
