The competition is heating up in the mutual funds segment with many new entrants. In this exclusive interview with BusinessLine , Aashish P Somaiyaa, Managing Director and CEO, Motilal Oswal Asset Management Company, explains how the AMC is trying to carve a niche for itself.

What do you think about the new government? Have they done enough for India Inc and the economy?

The turnaround started on two fronts well before the new government came in. One was when P Chidambaram was brought back as Finance Minister. That was when gold import controls were brought in, diesel prices were raised and subsidies reduced. Second was when Raghuram Rajan became the RBI Governor, he mounted a war on inflation.

Another factor that needs to be noted is that it is not out of pure love that FPIs have pumped in $15 billion every year into India, even in 2012, 2013 and 2014.

A strong US economy and the decline in gold and oil create a tailwind for the Indian equity market.

The new government cannot do much in the short term. Investors ask us about ‘Make in India’, I tell them it is a 15-20-year project. The Prime Minister is building the external environment to make it happen, he is talking about skill development — these are long-term projects.

How do you see the prospects of companies, post-earnings season?

It is a mixed bag. I wouldn’t tell anyone to bet on economic revival, on cyclicals or buy infrastructure stocks. We are strictly bottom-up. We tell investors to buy only those companies whose earnings are improving and there is visibility in earnings for the next couple of years. This is not the time to go after turnaround stories. It is better to stick to bigger companies. I don’t see the cyclicals turning around for at least the next two quarters.

What is the kind of growth you envisage for Motilal Oswal AMC over the next few years?

We are trying to position ourselves as a niche player or equity specialists.

Most of the other players are supermarkets with debt, equity, international stocks, real estate, etc.

We have only one way of picking stocks, what we advertise as “Buy right, Sit tight”. We buy high-quality companies and hold on to them; no trading. By high quality I mean Quality, Growth, Longevity of competitive advantage bought at a fair Price (QGLP). By quality we mean a good management and track record, growth stands for sustainable earnings growth, longevity is having competitive advantage that ensures sustained earnings growth and the stock should be available at a fair price.

We have only four funds — large-cap, mid-cap, multi-cap and ELSS — and all of them follow the same philosophy.

At best I might launch a small-cap fund, but there will be no more funds.

Are you pruning the number of funds you run?

We had a gold fund that we wound up and returned the money. I have filed for winding up our gilt fund, because we believe that our forte is equity. As an AMC we now manage ₹3,300 crore in equity PMS, about ₹2,400 crore in open ended equity mutual funds and ₹200 crore in ETFs.

So you don’t really believe in raising money through New Fund Offers?

Over the long term, many funds have created wealth but that is in their NAV.

How many investors have stayed with a fund through that period? If you google ‘value of rupees’ the top search item is ‘the value of ₹10,000 invested in Wipro’.

It means that investors know that Wipro bought for ₹10,000 in 1980 would be ₹600 crore now. I am clear I do not want to do NFOs.

So what do you do when price moves beyond its fundamental worth? Do you continue to sit tight?

No, that is not the intention. We have to sell under two circumstances — SEBI has formed the regulation that if the share of a stock rises beyond 10 per cent of my portfolio allocation, I have to trim the exposure. Second, I have to anyway sell if fundamentals change.

For instance, if earnings will suffer for the next three to four years, we have to look for something more attractive. To that extent, we have to churn.

Do you think being a new fund without a track record is a handicap since investors typically pick a top-performing fund in a category?

How do you market yourself?

It is definitely a handicap. There is no short cut; we have to create history by being around for three years.

We are not a supermarket but a specialist boutique. People know Motilal Oswal for 27 years, they know Ramdeo Agrawal.

We sweeten the deal by having no-load fund, keeping the fund very simple, just 15 to 17 stocks.

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