Saravana Kumar, the Chief Investment Officer of the Tata AIG Life Insurance Company is responsible for managing asset worth around Rs 12,800 crore. In his 22 years of experience, he has chartered success across territories like ICICI Bank, SBI Asset Management Company, Unit Trust of India and Bharat Electronics Ltd. This MBA from IIM, Bangalore has a passion to keep learning and the philosophy of success for this ‘Market Wizard’ is; ‘Get greedy when others are fearful’. He speaks to Mayura Shanbaug on what it takes to profit on the equity markets and despite the present bearish grip that the markets remain in, he believes that ‘the Indian markets are offering an attractive entry point for a long term investor with a 2 to 5 year horizon.’ His views…
A brief background about yourself?
I manage close to USD 3 billion in Assets under Management in my current assignment as the Chief Investment officer at Tata AIG Life Insurance. I believe that this is a great responsibility as our esteemed customers have placed their trust in the Tata brand name as well as the insurance experience of AIA. Earlier I have managed fixed income and equity products for the Global Treasury of International Banking Group of ICICI bank as well as debt and equity funds at SBI Mutual Fund and UTI Mutual Fund in a career spanning over 2 decades.
At what point had you given a thought to making a career in the stock / financial markets?
During my MBA at IIM, I had two distinct career paths to choose from. Either I focus onto a specialized line to leverage my Electronics & Software skills of my
experience or to become a generalist with a flair to learn and understand the insights from various sectors. I chose the latter and soon realized that it fitted with
my passion to keep learning about the Macro picture as well the various moving parts of the economy and its impact on various sectors, industries, companies and Management, etc.
How do you pick your trades/investments?
Do you use technical analysis, or employ fundamental data? I employ fundamental analysis to choose the stock i.e. what to buy and technical analysis to time the purchase i.e. when to buy. I use these two concepts as complimentary rather than a competing philosophy.
How would you describe your methodology?
As just mentioned to you, I pick stocks bottom up on sound business models, management as well as earnings visibility. This is thecore of my methodology. I try to find reasonable valuations and time the purchase based on market sentiment. Get greedy when others are fearful, is my policy.
What appeals to you about trading/investing. The short side or the long side?
I handle a ‘long only portfolio’ and am psychologically tuned to that style. I believe as economy the grows there will be companies which grow disproportionately and reward patient investors.
What differentiates you from other traders/investors?
I would not want to differentiate just to be different from others. I believe that discipline investment management approaches, rigor in research as well as conviction on the core portfolio are good qualities for a fund manager.
What gives you that edge?
I follow the attributes of conviction, investment discipline and rigor in all my investments.
Is there any applicable lesson to trading/ investing?
Do not be dogmatic. Question your ideas frequently and that helps to increase conviction. Respect the market.
How much of what you do is gut felt?
Gut feel is critical at one level, but only after you have done your dispassionate homework.
Do you try to anticipate or follow market trends?
I try and anticipate trends based on major shifts in the economy and endeavor to be an early entrant in mega themes. I have no problems in following market trends provided I believe that the theme is sustainable and structural rather than a fad and just a cyclical theme waiting to top out soon.
When you put money on a trade and it goes against you, how do you decide when you are wrong? What do you don ext?
When there is a material event which happens to a company and overrides my initial conviction then I cut losses as fast as possible. If an event is of a temporary nature causing a short term price destruction due to weak market sentiment, then I might consider adding more of the same.
Any positions you ever lost sleep over.What happened...?
Shortly after the US- World Trade Centre bombings in 2001, I distinctly remember a period of time when there was an extreme crisis of confidence in the emerging markets including India. This resulted in the corporate bond/equity market drying up on one-hand and redemption pressures due to retail investor pullout on the other. This was a scary situation, which I could not have budgeted and resulted in 3-4 days of sleepless nights.
What would make you wary about an investment?
If the management fails to live up to what they publicly disclose and chart their own path, I will be wary of trade and would monitor it in my watch list extremely closely.
Of the tens of thousands of trades/investments that you have done, which was your best trade?
My best trades were picking Wipro and Infosys in 1996 and riding the massive IT rally for 4 years. I had spotted Bharti at lowdouble digits and held on to capture the telecom story. My recent trades which have added value to our investors have been Titan Industries, Nestle, Indraprastha Gas and Coromandel International.
What was the story there?
The broad story is that if you catch megatrends early, pick the leaders, allocate adequate weight age in the portfolio and sit on them for years you can add maximum value to the investments.
Do you have a scenario about how the current bull/ bear market will end? Where do you see the Indian markets five years down the road?
I believe that the Indian markets are offering an attractive entry point for a long-term investor with a 2-5 years horizon. Having said that, I believe that there would be bouts of short-term volatility in the near term, if adverse global news flows. These may well be a buying opportunity, as fundamentals of the Indian macro remain robust.
Five years down the line the Sensex is likely to be higher- much higher than the current levels as India Inc compounds their profits at a CAGR of around 15%.
Your success mantra?
To summarize, conviction, dispassionate homework, rigor, and discipline are the key to success.
Any final words?
I urge investors to stay invested, perhaps even add to their investments, as valuations are reasonable and sit on the investments for 5 years. They are bound to be
adequately rewarded as the Indian economy is firmly and securely on a 7% plus growth trajectory in the medium to long term.