Why focused funds?

Roshi Jain has 17 years of experience in research and fund management and currently serves as Senior Fund Manager – Equity at HDFC Asset Management Co Ltd. Prior to joining HDFC AMC in December 2021, she worked with Franklin Templeton India AMC Ltd as a Vice President & Portfolio Manager.

Roshi earned her Post Graduate Diploma in Management from Indian Institute of Management, Ahmedabad and Chartered Accountancy from the Institute of Chartered Accountants of India She is also a Chartered Financial Analyst (CFA) Charterholder.

She is currently managing HDFC AMC Focussed 30 Fund and HDFC AMC Tax Saver ELSS Fund.  All these funds are recommended by Geojit.

In this exclusive interview with Geojit Insights, Roshi Jain talks about why you should invest in focused funds.

  1. According to you what are the key opportunities and challenges for the Indian economy? 

Answer: Pick up in manufacturing intensity in the economy is potentially a key opportunity for India. India is likely a beneficiary of shifts in the global supply chain owing to improving ease of doing business, large domestic market, and availability of skilled human resources at competitive costs – all of which should aid in domestic Capex revival. Production-linked incentives (PLI), focus on self-reliance in manufacturing and Government thrust on infrastructure improvement will also likely aid a pickup in domestic value addition. This should also help in the revival of domestic Capex. 

Challenges to the Indian economy at this point appear to be led by global factors. A slowdown in the global economy could impact exports and keep the trade deficit at relatively elevated levels further compounded by elevated energy prices. Inflation and forex reserves are other key variables to watch out for. Tightening liquidity could also impact capital flows to the country. 

  • How do you think are Indian equities placed in terms of valuations?   

Answer: As of 13-Oct-2022, NIFTY 50 was trading at a 1-year forward P/E of 18.5^, which is above the long-term average of 17.0. In that sense, at an overall level, markets are relatively expensive. Also, the tightening global liquidity and rising interest rates are likely to impact global growth. In that context, while India has structural growth drivers, the near term requires a prudent approach in light of global macroeconomic factors.

  • You have been managing focused strategies for quite some time and now manage the HDFC Focused 30 Fund. Tell us something about focused investing and the merits of investing in a focused portfolio.

Answer: Focused investing involves investing in a concentrated portfolio of high-conviction ideas with an endeavour to generate capital appreciation for investors. In a focused portfolio, the weightage of high-conviction ideas in the portfolio is relatively higher as compared to a more widely diversified portfolio thereby presenting a viable investment avenue for investors with a long-term investment horizon. 

Potentially, this does come with increased volatility on account of fewer stocks in the portfolio. For our Fund, we aim to manage this risk by diversifying in high conviction ideas across market cap segments and sectors as per the prevailing economic environment. More importantly, we lay emphasis on valuation discipline and our endeavour is to buy quality businesses but at reasonable valuations.            

  • Tell us something about the investment strategy of HDFC Focused 30 Fund.

Answer: The Fund, being a focused fund, can invest in a portfolio of up to 30 companies. 

While the number of companies is capped at 30, there is no restriction in terms of sectors and market cap segments. Consequently, the Fund can diversify across market cap segments and sectors to balance the potential higher volatility on account of fewer companies in the portfolio. The aim is to generate better risk-adjusted returns through a focused portfolio, backed by extensive in-house research conviction. 

The investment strategy revolves around adopting a bottom-up approach to stock selection, which focuses on quality companies at reasonable valuations. The idea is to select strong companies with growth drivers in the medium to long term. After a considered evaluation of the industry and business cycle and the positioning of a company within that sector, we take a risk-adjusted position in the portfolio. The track record of corporate governance and investor transparency is closely evaluated. The endeavour is to maintain a disciplined approach in looking for quality companies at reasonable valuations. In terms of valuation, we take a holistic approach to capture longer-term earnings and cash flow trajectory.  


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