Motilal Oswal Asset Management Company Ltd. (MOAMC) is a public limited company incorporated under the Companies Act, 1956 on November 14, 2008, having its Registered Office at 10th Floor, Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai - 400025.
Motilal Oswal Asset Management Company Ltd. has been appointed as the Investment Manager to Motilal Oswal Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated May 21, 2009, executed between Motilal Oswal Trustee Company Ltd. and Motilal Oswal Asset Management Company Ltd.
Motilal Oswal 5 Year G-Sec Fund of Fund (G) - 10.0217Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive (G) - 11.6363Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive-Dir (G) - 11.6763Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative (G) - 11.1261Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative-Dir(G) - 11.1688Motilal Oswal Dynamic Fund (Div-A) - 14.2934Motilal Oswal Dynamic Fund (Div-Q) - 12.4016Motilal Oswal Dynamic Fund (G) - 15.772Motilal Oswal Dynamic Fund-Dir (Div-A) - 14.5354Motilal Oswal Dynamic Fund-Dir (Div-Q) - 12.6335Motilal Oswal Dynamic Fund-Dir (G) - 16.7248Motilal Oswal Equity Hybrid Fund - Direct (G) - 16.5083Motilal Oswal Equity Hybrid Fund - Regular (G) - 15.7018Motilal Oswal Flexi Cap Fund(D) - 27.2133Motilal Oswal Flexi Cap Fund(G) - 36.2026Motilal Oswal Flexi Cap Fund-Dir(D) - 27.3228Motilal Oswal Flexi Cap Fund-Dir(G) - 38.8617Motilal Oswal Focused 25 Fund - Direct (D) - 22.6445Motilal Oswal Focused 25 Fund - Direct (G) - 38.6816Motilal Oswal Focused 25 Fund (D) - 20.2746Motilal Oswal Focused 25 Fund (G) - 34.5445Motilal Oswal Large and Midcap Fund - Dir (D) - 17.4052Motilal Oswal Large and Midcap Fund - Dir (G) - 17.4199Motilal Oswal Large and Midcap Fund (D) - 16.8117Motilal Oswal Large and Midcap Fund (G) - 16.8117Motilal Oswal Liquid Fund - Direct (Div-D) RI - 10.0077Motilal Oswal Liquid Fund - Direct (Div-F) RI - 10.0078Motilal Oswal Liquid Fund - Direct (Div-M) - 10.0562Motilal Oswal Liquid Fund - Direct (Div-Q) - 10.0294Motilal Oswal Liquid Fund - Direct (Div-W) RI - 10.0093Motilal Oswal Liquid Fund - Direct (G) - 11.2297Motilal Oswal Liquid Fund - Regular (Div-D) RI - 10.0055Motilal Oswal Liquid Fund - Regular (Div-F) RI - 10.0074Motilal Oswal Liquid Fund - Regular (Div-M) - 10.0547Motilal Oswal Liquid Fund - Regular (Div-Q) - 10.0283Motilal Oswal Liquid Fund - Regular (Div-W) RI - 10.0162Motilal Oswal Liquid Fund - Regular (G) - 11.1816Motilal Oswal Long Term Equity Fund (D) - 21.5252Motilal Oswal Long Term Equity Fund (G) - 27.401Motilal Oswal Long Term Equity Fund -Dir (D) - 25.7245Motilal Oswal Long Term Equity Fund -Dir (G) - 30.0141Motilal Oswal Midcap 30 Fund (D) - 26.6253Motilal Oswal Midcap 30 Fund (G) - 43.584Motilal Oswal Midcap 30 Fund-Dir (D) - 27.6105Motilal Oswal Midcap 30 Fund-Dir (G) - 47.9385Motilal Oswal Multi Asset Fund - Direct (G) - 11.0504Motilal Oswal Multi Asset Fund (G) - 10.8467Motilal Oswal Nasdaq 100 FOF - Direct (G) - 24.5725Motilal Oswal Nasdaq 100 FOF - Regular (G) - 24.2877Motilal Oswal Nifty 50 Index Fund - Direct (G) - 15.1429Motilal Oswal Nifty 50 Index Fund (G) - 15.0261Motilal Oswal Nifty 500 Fund - Direct (G) - 17.4922Motilal Oswal Nifty 500 Fund (G) - 17.2501Motilal Oswal Nifty Bank Index Fund - Direct (G) - 14.8144Motilal Oswal Nifty Bank Index Fund (G) - 14.6103Motilal Oswal Nifty Midcap 150 Index Fund (G) - 20.2801Motilal Oswal Nifty Midcap 150 Index Fund-Dir (G) - 20.5801Motilal Oswal Nifty Next 50 Index Fund - Dir (G) - 14.9702Motilal Oswal Nifty Next 50 Index Fund (G) - 14.7873Motilal Oswal Nifty Smallcap 250 Index Fund (G) - 20.9342Motilal Oswal Nifty Smallcap 250 Index Fund-Dir(G) - 21.236Motilal Oswal S&P 500 Index Fund - Direct (G) - 15.5415Motilal Oswal S&P 500 Index Fund (G) - 15.3866Motilal Oswal Ultra Short Term Fund - Dir (Div-D) - 10.0265Motilal Oswal Ultra Short Term Fund - Dir (Div-F) - 10.0505Motilal Oswal Ultra Short Term Fund - Dir (Div-M) - 10.0336Motilal Oswal Ultra Short Term Fund - Dir (Div-Q) - 10.1781Motilal Oswal Ultra Short Term Fund - Dir (Div-W) - 10.0377Motilal Oswal Ultra Short Term Fund - Dir (G) - 14.2066Motilal Oswal Ultra Short Term Fund (Div-D) - 9.9638Motilal Oswal Ultra Short Term Fund (Div-F) - 9.9746Motilal Oswal Ultra Short Term Fund (Div-M) - 9.9644Motilal Oswal Ultra Short Term Fund (Div-Q) - 10.1091Motilal Oswal Ultra Short Term Fund (Div-W) - 9.9674Motilal Oswal Ultra Short Term Fund (G) - 13.7231

Successfully navigating midcap volatility

  • Mr. Akash Singhania|
  • Sr VP & Fund Manager
Akash Singhania
  • Motilal Oswal Midcap 30’s performance has improved sharply in the last 1 year, as Akash took proactive steps to move away from the froth that had built up a year ago in the midcaps space
  • Akash believes that despite the correction, midcap valuations as a whole are still expensive and consensus estimates of earnings growth are unrealistically high
  • Akash believes that with a portfolio earnings growth of 31%, debt-equity of 0.04 and with 80% of portfolio stocks having net cash on balance sheet, his portfolio is well placed for a midcap rally, when it comes
Motilal Oswal Midcap 30 3 Month 1 Year 3 Year
Fund -1.01 -7.32 8.46
NIFTY Midcap 100 TRI -7.19 -17.00 13.32
Category -3.62 -12.20 12.82
Rank within Category 3 4 18
Number of funds in Category 24 23 20

(As on Feb 11, 2019. Source: ValueResearch)

WF: Your fund’s performance has improved sharply in the last 1 year – it looks like you have been able to protect on the downside better than your peers. Did you consciously adopt a more defensive strategy? What did you change at the margin over the last 12 months to enhance fund performance?

Akash: We had become cautious on mid and small caps in January 2018 as valuations reflected froth in many of these companies. We reduced our small cap exposure substantially and moved into large caps. Further, we churned few mid cap stocks where earnings growth was lagging and bought high quality mid cap companies with robust earnings growth potential. In the past five reported quarters, the weighted average earnings growth of the portfolio has been 31%. During the same period, mid-cap 100 index reported earnings decline of 14%. The portfolio has a return on capital employed (ex-financials) of 32% and the debt equity ratio (ex-financials) is 0.04 with 80% of companies having net cash in their balance sheet. The valuation premium of a high quality and high growth portfolio like our fund which normally trades at a decent premium has now gone into a discount compared to the mid-cap 100 index, largely led by delivery in earnings growth.

WF: A plain reading of your fund’s performance seems to suggest that you have been better at protecting capital on the downside compared to capturing the upside of the bull phase. Is this a fair comment?

Akash: Mid-caps have corrected 20% in the last one year and with the above changes we have been successful in protecting the downside. High return ratios and low leverage of the portfolio helped to achieve this. However, it is important to note that the earnings delivery is strong and relative valuation of the portfolio compared to the mid cap index is cheap. Hence, in our view, the portfolio is well – positioned to ride a rally in the mid-cap space as and when it happens.

WF: Some experts believe that even after the steep correction, midcaps have only come back from premium valuations over large caps to neutral and are not exactly cheap. How do you read valuations in the midcaps space?

Akash: Valuations for mid-caps (at 35x trailing multiples, 20x one year consensus forward multiples) are still at a premium compared to large caps or their own longer term trading history. The key lies in estimating the future earnings growth. Instead of estimated earnings growth of 30% in FY18, mid-cap earnings de-grew by 15%. In CY19, the street is building a whopping 80% earnings growth. We believe the earnings growth for FY19 would be 10% and CY19 would be 20%, which is much lower compared to the street estimates. In our view, valuations in the mid-cap space are still expensive, though the froth is gone.

WF: What are your key over and underweight sectors and why?

Akash: Consumption sector including housing and consumer discretionary remains a perpetual strong theme to invest. Companies in this space would continue to enjoy higher and longer earnings growth as they are more structural in nature. They exhibit higher stability and consistency in growth as well as lower volatility in business performance. Retail oriented banking and finance companies which fund consumption expenditure should also benefit.
We are under weight on telecom, utilities, capital goods and infrastructure sector. Competitive issues in the telecom sector and delay in pick-up in investment cycle has marred the earnings growth of companies in utilities, capital goods and infrastructure sector. Companies in these sectors are suffering from high leverage as well. We think it will take some more time before growth recovers for this sector.

WF: Which sectors do you see creating significant wealth over the next 3 years?

Akash: We are more positive on consumer staples, consumer discretionary and retail oriented banks and finance companies which lend for consumption activity as we believe consumption is a secular growth story for India given its demographics and income levels. The valuations for most of these companies is fair and we expect them to be steady compounders creating wealth in the long term based on their earnings growth trajectory.

Courtesy: Wealth Forum

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