$20 Billion Manager Wooed by Disappointing Stocks

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It seems as though, according to the oldest mutual-fund company in India, its worst-performing stocks are actually valuable.

While the overall market has reached incredibly high numbers and indicating growth and prosperity, only India’s technology and healthcare sectors are in the red.

Dr. and Lupin Ltd.

The biggest losers, by a whopping 30% decrease on S&P BSE Sensex, are Reddy’s Laboratories Ltd.

The country’s pharmaceutical companies are seemingly experiencing even lower than their already low prices for the generic drug market in the United States, which happens to be their largest market. To make matters worse, they are also experiencing even greater scrutiny from the regulatory branch. In addition to that, there are significant concerns regarding their local technology industry, as the United States is their number one market in sales thereof. All this mayhem is mostly attributed to President Trump’s agenda which tightens working-visa regulations and is threatening local technology businesses, such as Infosys Ltd. To add insult to injury, a major boardroom conflict is also creating Infosys Ltd. more financial woes.

Swati Kulkarni, a fund manager at UTI Asset Management Co., whose company is responsible for $20 billion in assets, claims that the pharmaceutical industry’s woes are at the root of the overall troubles. She goes on to say that the IT companies are cash rich and provide higher returns on capital, although this is only apparent when one studies their balance sheets.

In an earlier interview, Kulkarni, a praised fund manager responsible for approximately $1.5 billion in assets, invests heavily in both the technology and health sectors. With the latter, she focuses on pharma companies that target chronic illnesses. With regards to software companies, the UTI Dividend Yield Fund lists Infosys as her biggest holding, and as second in line at the UTI Mastershare. According to Bloomberg’s data compilation, the two funds have grown 19% in this year alone and the year is not over yet. These gains match those in the Sensex.

Retail investors and their cash injections are what is driving the Sensex. With regulatory changes in effect, people are swarming to the stock market. Various reasons for this growing interest in the stock exchange include low returns from traditional picks. Investors just weren’t happy with the returns brought on by real estate and even gold.

Data compiled by the Association of Mutual Funds in India indicates that local stock funds secured $6.4 billion, or 411 billion rupees, in the second quarter of this year. These figures are about tripled those from the year before! Investments in balanced funds increased fivefold during this same period to the tune of 301 billion rupees. Kulkarni believes her funds are at par with competitors due to the focus placed on blue chips, which are dawdling compared to stocks in smaller, lesser known firms. For example, the S&P BSE MidCap Index has regained 28% since the beginning of the year. She also claimed that the strategy for their success involves a minimum of 80% investments in large-cap holdings.

Click this link to learn more about mid-cap valuations.

Kulkarni continued stating that the opportunities provided by mid-caps may be lost. However, she claims they cannot be tempted to chase the current trend and that it’s best to remain transparent and maintain their style for long-term success.

She has a distinct approach with regards to investments, focusing on companies that are efficient with regards to capital and have large cash flows at their disposal. Her investment strategy was recently celebrated in a report earlier this year on a piece about women in the money-management field.

Ms. Kulkarni is one of a select group of women that make up only a mere 7% of the money-management business industry in India. There are only 17 other women fund managers in the entire country consisting of over a billion people. In the rest of the world, such as France, Israel, and Spain, for example, women make up about 20% of market managers. It’s very possible that these low numbers will change in the near future, said Kulkarni.

She has seen a surge in women joining this lucrative industry and making their way into the field of fund management in what is a predominantly male industry.