How Birla Sun Life equity fund outperformed in multiple periods

ET Intelligence Group: Among multi-cap schemes, Birla Sun Life Equity has distinguished itself as the only one which has been in the top three best performing schemes in the past one-, three and five-year periods. So, what strategy has worked for the scheme's fund manager Anil Shah who has been managing the scheme since 2012?

There are a few factors which have worked in Shah's favour. He uses a combination of top-down and bottom-up approach in selecting stocks depending upon the macro view of a sector. Being a multi-cap scheme, he picks up stocks across market capitalisation which show reasonable visibility of growth and trade at reasonable valuations.

While selecting stocks, he observes various variables such as operating margins, sales growth and debt reduction. A key trend in Shah's investing pattern is his ability to take concentrated exposure in stocks in which he has strong conviction.

Among prominent companies which have boosted the scheme's returns in the past one, three and five periods are Dishman Pharmaceuticals & Chemicals, Tata Communications and NBFCs such as Bajaj Finance and Cholamandalam Investment and Finance Company . Shah's macro call on NBFCs has paid off. He believes that public sector banks would not be able to cater to niche financing needs of new consumers and sensed that NBFCs would be able to fill that gap. His fund bought shares of Bajaj Finance at an average cost of `400, which now trade at over `1,047. Besides this, his micro call on Dishman Phrama also paid off.The fund purchased 2.9% of the company's equity in September 2015 based on a few triggers such as improvement in margin, repayment of debt and availability of the company's stock at an attractive valuation. At the end of December 2016, the fund held 2.3% of the company's paid up equity.