“If you look at the larger picture, we are looking for the PSUs, neither we get too complacent about the move which happened very recently nor we get too tense about what happened in last two or three trading sessions,” says Sandeep Tandon, CIO, Quant Mutual Fund.
I would like to start our chat around the PSUs. People who admire you, who love your style of stock picking and theme which you actually spot on every now and then say that a nice corrective phase has come in and you have just raised a very meaningful sum from your PSU fund. Your detractors on the other side who criticise you and who look at you with doubts say that you called the top in PSUs. So, let us take the discussion forward on how would you be going about deploying this money in the PSU and what is your take on PSUs. Is it right to look at the entire PSU back in one light or we have to take it carefully, that you have fresh funds for PSUs now?So, the way we are looking at, we have been talking about value as a thesis and obviously PSU qualify as a value thesis right from September 2021. So, we were relatively as compared to somebody who is looking at the top, we are very early in identifying that inflection point and I have been very bullish for last more than two years now in this space.
But we remain very constructive. If you look at the larger picture, we are looking for the PSUs, neither we get too complacent about the move which happened very recently nor we get too tense about what happened in last two or three trading sessions. It is a part of life when market rallies significantly, is bound to correct. So, everybody when people talk about healthy correction what happens, health of most of the participants get affected. But as an institution when we look at much larger thesis, I think something when you look at the larger pieces, how the sentiment or the perception is getting built globally about India, how the global liquidity situation and if you look at in tandem then answer is very different.
And I always talked about that growth as a cycle which peaked out in September 2021 which lasted for a decade, more than like started in rally from August 2012 and if even 20-30% of money shift from growth towards value, there will be big up move which can continue in value stock and that is a thesis which we are playing and I think it is a decadal call.
It is not a just one quarter or one year call which we are playing out and obviously the bigger call is value not PSU and within that PSU fit the bill perfectly.
So, it is apt for us to say and look at the changes which are happening. Look it from the governance point of view changes happening in the public sector, the capital allocation which has been a very big concern in the past that is settling down.
People used to look at the political outcome, these are the companies which were vulnerable on that thing that has strengthened a lot. So, if you look at multiple data points, it is all supporting largely a very constructive thesis and still grossly under owned.
Now, if you really look at, if I have to address this point of a very recent correction, one of the channel I talked about when your conviction is not there, like majority of the portfolio managers or the AIF or PM managers do not want to even talk about PSU.
This is the lowest thing on their priority list. People rather say it is in the negative list, we do not buy PSUs. When some of these participants are forced to participate in these names because PSU stocks or value as a thesis has been delivering very well, they participate because of just to manage their underperformance.
The underperformance was very meaningful just to manage that and you buy these names, obviously then conviction is not there.
When first round of correction happen and that is the reason I have seen the massive sell-off comes, people vomit immediately because it is not coming from their conviction, it is the compulsory trade which they are participating though.
When conviction is not there, when any jolt comes to the market, you give up first and this is what is exactly happening in the market and it is valid for majority of the mass large family office investor ultra-HNI who have been never believer of this thesis.
So, see we as a house, we always believe that we are unconstrained fund house. If we see opportunity in growth of particular sector, we will participate and when we are seeing a decadal opportunity coming in these names, I will definitely participate.
These corrections can be a great opportunity since we are launching our own PSU fund which will be closing on 15th. We think timing cannot be better than this when they have corrected a lot, when we get opportunity to deploy. So, we are very happy about that.
Yesterday, I also observed there was a big trade which your house has taken on a recently listed hospitality name. I would not take the name. It is a very large call which you have taken, the most recently listed hospitality name if I am not wrong. Hotels, what is your call there? You have been very choosy in your hotel picks at your fund.
We have been very constructive about tourism as a space. If you really look at, I think tourism has been a talking point post pandemic and now what happened even post Ram Mandir temple, suddenly this has become a buzzword.
I think something has changed post COVID. People who used to save money and suddenly they realise, I am just looking at much larger thesis, when people have realised their life is very limited, why do not we enjoy instead of saving.
Something got changed in terms of consumption thesis if I have to look at. The behaviour aspect if I have to talk about that got changed.
But people are still circumspect whether this uptick in LIC is going to continue or not. What is your thesis behind it?
So, if you understand us, then we try to identify sector or stocks in the most neglected zone. And we tend to prune down our exposure. So, LIC was one of very classic example. It corrected significantly. In fact, if we look at post listing also, stock has actually never performed. And this time when it became closer to significantly lower levels, we spotted that opportunity. It was traded in the most hated zone despite one of the largest market cap company in the PSU space. This has a potential to qualify for index stock in future. Right now, the free float aspect the impact was on the higher side.
It does not fit the bill and it is not part of the F&O list also. But you will see this stock also coming in the index and when we spot that opportunity that despite numbers have a potential to improve which we have seen in this quarter and it is in extremely neglected, hated zone, so since we are largely a behaviour house, we spotted that brilliant opportunity and then this is the time to build our exposure since we are constructive on value as a thesis, we are constructive on even insurance and mutual fund as an industry in a big way.
We are very constructive on the PSU. So, it is a combination. This was a perfect fit choice for us and that is the reason as a house, it is a publicly disclosed formation, we took a large bet and it paid off very well.