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SAMCO Asset Management Private Limited has announced the launch of India’s first actively-managed momentum fund – SAMCO Active Momentum Fund . Leveraging the persistent and globally acclaimed momentum anomaly in finance, the fund aims to deliver exceptional risk-adjusted returns to investors, tapping into the immense potential of momentum investing in the Indian market.

The Nifty 200 Momentum 30 index has achieved an impressive compound annual growth rate (CAGR) of 17.79% over 18 years, outperforming the broader Nifty 50 and Nifty 500 indices. Similarly, the Nifty Midcap 150 Momentum 50 index has achieved an exceptional CAGR of 21.28% since its inception. Moreover, when compared to the MSCI World Index, which produced 10x returns, the MSCI World Momentum Index delivered a commendable 20x return.

Based on this extensive market research and a proven track record, SAMCO MF launches India’s 1st active momentum fund that utilizes these insights offering investors an opportunity to tap into the remarkable growth potential that market momentum can provide.

Extensive historical research conducted by MSCI World Momentum Index substantiates that the Momentum factor has consistently proven itself as one of the most potent generators of alpha. Building upon this powerful investment strategy, SAMCO Active Momentum Fund meticulously selects stocks with momentum characteristics such as breakouts, price leadership, and more, deploying a proprietary momentum-seeking algorithm. By capitalizing on the prevailing price trends, the fund aims to outperform the market and generate superior returns for investors.

Umesh Kumar Mehta, Chief Investment Officer (CIO), SAMCO Asset Management Private Limited, said, “Historically, the momentum factor, or the phenomena based on persistence of stock price trends has been one of the strongest return generators. In Momentum investing, active management offers several unique advantages such as a wider investible universe, quicker rebalancing and hedging flexibility during periods of anti-momentum. By investing in stocks exhibiting momentum characteristics, we aim to offer our investors the potential for superior risk-adjusted returns.”

The fund manager for SAMCO Active Momentum Fund is Paras Matalia , a seasoned investment professional with a deep understanding of momentum-based strategies. With his expertise and experience, Matalia will oversee the fund’s investment decisions and work towards maximizing returns for investors.

Commenting on the launch, Viraj Gandhi , CEO, SAMCO Asset Management Private Limited, said, “We are excited to introduce SAMCO Active Momentum Fund as India’s first actively managed Momentum Fund and this represents an exciting step forward for the Indian investment landscape. We believe this fund will open new avenues for investors seeking to benefit from momentum investing. With our dedicated team and a robust investment strategy, we are confident in delivering value to our investors.”

The New Fund Offering (NFO) from SAMCO Active Momentum Fund commences on June 15, 2023, and concludes on June 29, 2023.

An important point for the investors to keep in mind is that the subscriptions will not be accepted after the NFO period until further notice. Furthermore, only those Systematic Investment Plans (SIPs) registered during the NFO period will be accepted, with fresh SIP registrations will temporarily be restricted post NFO until further notice.

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The monetary policy committee or MPC opted for a status quo in its policy review today. The Reserve Bank of India kept the repo rate, the key short term policy rate, at 6.50%. Here is what some debt fund managers had to say about the policy review and what mutual fund investors should do in the current scenario.

Pankaj Pathak , Fund Manager – Fixed Income, Quantum AMC

As widely expected, this was a do-nothing policy. Given the RBI has already lifted the effective policy rate by 290 bps in the last financial year, it makes sense to wait for the past rate hikes to transmit through the real economy.

The highlight of this policy was the RBI’s emphasis on getting to the ultimate goal of 4% headline inflation. The governor aptly used the quote – “The ideal must not be lowered” to suggest that we shouldn’t get too comfortable with inflation falling to 5%. The headline CPI inflation is still far from 4% target. This quashes any possibility of a rate reversal this year. We would expect the policy repo rate to stay at 6.5% for a long period.

On liquidity, the RBI did acknowledge that deposit of Rs. 2000 denomination currency notes will add to the already high liquidity surplus in the banking system. However, they chose not to deploy any durable liquidity absorption tool to reduce the excess liquidity. In our opinion, this should result in further decline in short term money market rates.

From the broader bond market’s perspective, this policy was neutral to slightly hawkish. Going forward, we would expect bond yields to move up from current levels – pricing for uncertainty around the monsoon and inflation impact of higher than usual increase in minimum support prices for the kharif crops.

Investors with 2-3 years holding period should take a medium term and can invest in dynamic bond funds as long term fixed income allocation. Investors with shorter holding period should stick to Liquid funds.

Murthy Nagarajan , Head-Fixed Income, Tata Mutual Fund

“The Monetary policy statement reiterated its commitment on withdrawal of accommodation to ensure inflation progressively aligns with the target, while supporting growth. Headline inflation is projected to decline in 2023-24 from its level in 2022-23 but still be above the target of 4 % , warranting continuous vigil. GDP growth is maintained at 6.5 % levels and CPI inflation is projected at 5.1 % versus 5.2 % stated in the April 2023 policy. RBI, consumer survey on CPI inflation is projecting 60 basis points fall in inflation expectations from September 2022 levels. However, early results of RBI surveys polled for manufacturing, services and infrastructure firms expect input and output prices to harden. This survey and global development of interest rate hikes by developed countries like Australia and Canada has led to RBI adopting marginal hawkish stance. Macro-economic factors are favorable like lower commodity prices, lower oil prices. Food inflation is moderating due to record rabi production . The Rupee is expected to be stable due to lower current account deficit, FII Inflows of 8.2 billion in the current financial year. All these factors could bring current year CPI inflation below 5 % levels against RBI projection of 5.1 % levels. The 10 year g sec yields is expected to trade in the band of 6.95 to 7.10 in the coming months.”

Prashant Pimple , Chief Investment Officer – Fixed Income, Baroda BNP Paribas Asset Management India
The Monetary policy outcome was in line with our expectations in terms of status quo on policy rates and lowering of FY 24 CPI projections to 5.10 from 5.20% ; however, MPC preferred to be in a wait and watch mode with as Governor mentioned “ arjuna’s eye “ towards inflation.

With 1 year forward real rates in a positive territory and somewhat a goldilocks economy for the domestic markets ; We expect a long pause by RBI for this calendar year. We expect the yield to bear steepen from here.

Puneet Pal , Head-Fixed Income, PGIM India Mutual Fund
“The Reserve Bank of India maintained status quo on Policy rates as expected and confirmed the expectations of a long pause with a slightly hawkish undertone as it retained the Monetary Policy stance at “Withdrawal of accommodation to ensure that Inflation progressively aligns with the target, while supporting growth.” The central bank acknowledged the recent softness in Inflation prints by reducing its Inflation forecast for FY24 to 5.10% from 5.20% earlier. The growth forecast was retained at 6.50%. We see the policy as hawkish relative to market expectations as the RBI Governor, in his statement, reiterated that Inflation coming down within the Inflation targeting threshold was not enough and that RBI and MPC remain focussed on bringing Inflation down towards the target of 4%.”

Sandeep Bagla , CEO, TRUST AMC
It is a pause, and the possibility of the next move being a cut is far higher than that of a hike. Growth remains resilient and the inflation while moderating now, could rise in the future as labour market remains tight and wage-inflation spiral remains a distinct danger. Australia and Canada have raised rates after a pause. We are not out of the woods yet. Liquidity surplus will have to be reduced as Rs.2000 notes seep into the banking system liquidity. It is quite possible that market yields rise by a few basis points as RBI waits for more economic cues amidst continued global contradictory cues on inflation and growth fronts.

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“We like basic industries with hard assets, where we believe it is easier to triangulate intrinsic values and where the multiples aren’t generally high in the first place,” says Arun Chulani, Co-founder, First Water Capital Fund.

In an interview with ETMarkets, Chulani who has over 20 years of experience said: “While New Age, AI , Biotech, tech etc. may be an excellent business, they don’t always give you a chance to enter at relatively reasonable prices” Edited excerpts:

What is the investment philosophy of First Water Capital Fund- Category III AIF ?
There are various themes that run through our investment philosophy. At our very heart, we are value investors .

But this does not mean that we are looking around to puff on cigar butts. We are also looking for a trigger to unlock the value. It might be growth or inflection that we believe will eventually allow value to be recognised.

Occasionally, you identify some opportunities that you believe will give a decent return. So, we like to build up larger positions, and that way we build up a concentrated portfolio .

If you are going to swing your bat, you don’t have to just go for singles; sometimes market does give you an opportunity to knock one out of the park. And hopefully, that makes a difference to your performance.

Last but not least — we look at hard-asset businesses. Why is this?

Because while New Age, AI, Biotech, tech, etc. may be an excellent business, they don’t always give you a chance to enter at relatively reasonable prices.

Additionally, if you are coming in at high multiples, you always counter multiple compressions. How does someone discern whether a stock is valued at 60 PE or 40 PE?

That’s why we like basic industries with hard assets, where we believe it is easier to triangulate intrinsic values and where the multiples aren’t generally high in the first place.

On a 2 and 3-Year basis, the Dollar returns have been impressive. Did you tweak your strategy amid recession, slowdown woes globally?
Of course, the headwinds have been strong for a couple of years now. While we did tweak some aspects, it is generally on a moderate basis.

For instance, we moderately added to our cash to create a drag to our volatility early in 2022.

However, we generally stuck to our themes and sectors because we believe in India’s long-term story and there will always be market and business cycles.

How are FIIs, and HNIs looking at Indian markets? What is the feedback you are getting from the investor community?
Having spoken to a number of FIIs and HNIs, I believe that Indian investors are beginning to carve out their own space when it comes to asset allocation.

We are sometimes bucketed along with other Emerging Markets while the US, China, and Europe receive more focus.

However, given what they are seeing in those regions compared to the current brightness/robustness of India, I think that more sticky funds will find their way to our shores.

We are the 5th largest economy in the world today and are now moving towards 3rd, it deserves a dedicated allocation.

AIF Talk: This fund manager is currently sitting on 10% cash amid headwinds

“Ballpark we are currently at 10% cash. One of the main reasons to increase this was because of the number of headwinds that we are experiencing from conflict, Fed tightening, inflation and the potential recession, etc.,” Arun Chulani, Co-founder, First Water Capital Fund, said.

How do you manage risk in the portfolio? What is the exit strategy?
We take risk very seriously but also look to discern between notional loss and structural loss. Just because Mr Market is whipping a stock around doesn’t mean that we are reducing our position.

In fact, if the structural story still holds, we might even add.

There are always a lot of moving parts when it comes to managing a portfolio. But generally, we keep our eye on the fundamentals of a company as well as the relative risk-to-reward ratio of each stock and the portfolio.

If there is a structural issue, then we would be looking to reduce and if a stock is moving towards its perceived intrinsic value, we may also be looking to partially sell down and rotate into a stock that we believe is lagging and has a higher return/risk ratio.

There is always a myriad of factors that we look at from the fundamentals as well as respecting the market.

You are invested 80% in equities and the rest in Debt and Cash. Did you increase your cash holdings recently given the fact that Indian markets are trading near record highs?
Ballpark we are currently at 10% cash. One of the main reasons to increase this was because of the number of headwinds that we are experiencing from conflict, Fed tightening, inflation and the potential recession, etc.

There are more than a thousand listed stocks in India. So hopefully within them you can find a basket that is reasonably valued with decent upside.

For instance, recently our portfolio was valued at less than a book and around 8x PE. That is not so bad.

Have you added any stock to the portfolio recently? Or made an early exit?
Nothing specific comes to mind. While we are always looking for good opportunities, we may not include everyone as we like to focus on building good knowledge on the ones that we have.

The more stocks that you have, the less bandwidth you have to build up an in-depth understanding.

What are your views on the rate hike cycle by central banks globally – how will it impact equity markets?
Overall, we don’t go around trying to second-guess macro events, but we tend to look at the underlying businesses and sectors themselves. We are hopeful that those in charge are capable of balancing growth and inflation and leave it to them.

Higher rates will increase costs for companies, but India’s interest rate is simply back to pre-covid levels and are lower than what they were 10 years ago.

Hopefully, our economy is more used to dealing with inflation and higher interest rates than those elsewhere.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of Economic Times)

In Video: AIF Talk: This fund manager is currently sitting on 10% cash amid headwinds

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