We are looking at multi-year, multi-decade growth ahead: Siddharth Bothra, Motilal Oswal Asset Management

Talking to ET Now, Siddharth Bothra, Senior VP-Fund Manager, MOSt Focused F25, Motilal Oswal Asset Management, says the entire portfolio is a bottom-up, built up fund and as and when they find something interesting, pharma will get represented in the funds.

Edited excerpts:


It does not seem like there is any worry in the market even in the near term. Most people that we have been chatting with about Gujarat elections say that if indeed it is a negative surprise also, it will be at best a 1% to 2% move on the index but this market is in shipshape. Is that your belief as well?

What we are seeing in the economy right now is even the Q2 numbers show some kind of a broad-based recovery. What will also happen is when you look at the third quarter numbers and from there onwards, the base effect will start becoming favourable.

The main problem in the market is that for the last six-seven years, we have seen very tepid earnings growth and the overall balance sheet for companies and all has been under stress. The core issues around these are getting addressed and hence we are looking at growth coming back much stronger in the coming years and probably a multi-decade, multi-year kind of a growth ahead. From that perspective, markets do look very attractive for any long-term investor.

I am getting very mixed views about what 2018 could be. Raamdeo Agrawal, the Joint Founder of your firm, has been making a case (Chase value, not price, in an expensive market like this: Raamdeo Agrawal) that valuations are looking slightly stretched. So what is the house view? Prepare for a correction before the next upmove?

He is absolutely right. When you look at it 2018 numbers, the valuations as we stand currently, look expensive but the point is that if you are a long-term investor and if you look two-three years ahead, what would happen is not many people right now are pricing in a multi-year kind of a growth which is quite possible because the last two years have been years of adjustment where we have had major reforms which created near-term disruptions in the economy. The benefits of the reforms are not yet seen and from a two-three years’ perspective, even his perspective on markets are positive. The outlook for long-term investors continues to be attractive.

In portfolios, financials are about 37 or 40% approximately. In that range, is it not slightly risky? What if something goes wrong with financials whether globally or locally?

Actually we have close to around 44-45% in BFSI. But underlying that, is a more heterogeneous sector. So within that 40% plus kind of a weight, there are private banks, insurance plays, a mortgage player. If you go one by one, each of them for us is a bottom up investment and they look fairly attractive and even on the valuation side very attractive.

If you look at a mortgage company like HDFC, it would be one of the cheapest large-caps that we are looking at today and they are also very different. In our portfolio, almost 15% to 17% on the weightage is in insurance and unlike the other banks and financial plays, these are companies which do not have leverage. They give out almost like 50-70% as dividend payouts and they are sitting on free cash.

It is basically very naïve and wrong to just club them together and take a view. We are very comfortable with our weightage on the BFSI and it is one of the best ways to capture the opportunities we have in the market -- whether it is financialisation of savings by which money is moving from physical to financial assets whether it is some very secular, one of the best managed and growth companies like HDFC Bank and so on. BFSI space continues to be attractive for us and would retain a large weightage for us.

As we look ahead into 2018, I see that your best themes continued to be the BFSI as well as consumer discretionary and the avoids continue to be the contra bets for most -- that is -- IT and pharma. IT I understand, but why is pharma still an avoid?

We have been looking at pharma for some time. It is something which has historically give us multibaggers and this is clearly one very attractive sector but in the near term, some of the large ones that we have had, have been having several headwinds and now the valuations have become very attractive.It is something we have been looking at very closely and we do not have any negative view on the sector as such.

For us, the entire portfolio is a bottom up built up fund and as and when we find something interesting, we will have pharma also getting represented in our funds.