Tuesday, May 7, 2013

Where am I investing now?


Searching for good equities at the right price is a waiting game – one has to wait patiently.

Over the past few months, there is news of more quantitative easing from Japan and Korea, the US stock markets are at an all time high, the US real estate market looks postive, the jobs data in US is starting to look OK, there is a seeming calm in the EU but the Indian political scene is unstable and does not give much confidence in the short term – with such good and bad news coming in,  the Indian stock markets have to be volatile. 

In the past 2/3 months, I have invested in Gruh Finance, Jubilant Food works and Nesco. All these companies are good companies, but their current valuations are high.  I still went ahead and invested as I believe that over the next few years, the valuations will stay high due to the low interest rate regimes globally and India growth story.

Having said that, this time I am investing through two sectoral mutual funds.  These are in sectors that are fairly ever green – these sectors are here to grow as the Indian  GDP per capita grows. As Indians grow richer over time (or less poor over time), the FMCG and the Pharma sectors will do well.  Riding this wave are a few mutual funds that have given very good returns in the past few years.

In the FMCG sector, there are two funds of which  the ICICI Prudential FMCG fund is the bigger one – it still has a fairly small asset base  of Rs. 214 crores. As the sector is doing well,  this fund has given an ROI of 17% compounded per annum for the past 5 years and 25% compounded per annum for the past 3 years. The fund manager manages about Rs 2500 crores worth of funds, of which this is his best performing fund. I have decided to invest in this fund with a 3 year plus time frame

There are three pharma sector funds - of which the Reliance Pharma fund is the largest with an asset base of Rs 675 crores.  This fund has given 23% per annum compounded over the past 5 years and 12.5% per annum compounded over the past 3 years.  The fund manager manages about Rs 5000 crores worth of funds, of which this is his best performing fund. I am investing in this fund also with a 3 year time frame.

Amongst the two funds, I am betting more on the FMCG fund – that story to me is a more positive story.  Having said that, I do believe that the pharma story is also a good story to place your bets on.   I normally aim at 15% plus tax free returns in whatever I do – and I am hopeful that these funds will meet my expectations.