Invest in large cap names when markets are down and go up to 50 % allocation in large cap when many opportunities are available. Invest in flexi cap growth stocks just when there growth phase is about the start and hold them to the ride the whole growth story. Create contra/short positions in stocks where significant correction is happening through options and also in dull and laggard stocks. Every markets give this opportunity where few stocks either correct or don’t perform. Generate additional alpha from shorting of this stocks.

1. Strategy for the AIF
The Thought: - More than 90 % of the AIFs in India are long only funds. The strategy involves
buying fundamental stocks on valuation matrix and then holding it for long term to create
alpha over very long periods. The basic assumptions are company continuing to grow at 15 %
compounding and hence the stocks keep compounding. Is It now really happening?
Markets continue to remain sideways for a longer period like the period from 2017-2020 and
from April 22 to current date. What essentially happens is even fundamentally companies
continue to grow the P/E doesn’t expand, it actually contracts. The basic reason behind this
is that post 2012 the markets have been driven by liquidity more to say, rather than
fundamentals. That is what is happening as on the current date. Liquidity is being sucked away
from the markets and rising interest rates are creating a dent in the profitability of the
companies which were already affected by rising inflation.
What solution we have to offer? Fundamentally and technically long term wealth can be
created if money is invested in high growth stocks. But the question is how do you time them?
In theory as well as practical you cannot time the markets bottom. So what do we do
different?
Our Approach
Large Cap Approach (Portfolio weights 20-50% range)
We shall buy fundamentally strong growth stocks at the lower end of the valuation matrix.
We shall invest in strong fundamental companies that are undergoing correction due to a
temporary situation and where management pedigree along with the understanding of the
fundamentals suggest that the situation is going to be temporary. We shall look to invest in
large cap nifty 50 companies using this approach.
We shall invest in this companies only when they are available at the prices which are even
below historic valuations. Our experience suggests that this opportunity is available in a 2 -3
year time frame and once invested can give returns ranging from 50 to 100 % in the next 1 -2
years. Few examples are:-
We shall invest in this companies and hold till they reach the upper end of the valuation. We
have historically used this approach and created wealth for our clients.
(Portfolio weights 20-50% range)

2. Midcap & Small Cap Approach (Portfolio weights 20-50% range)
We shall be benchmark agnostic and create a portfolio of high growth stocks
We shall have an approach to invest in growth companies which are value picks in terms of
its stock prices as compared to its earnings. We have been able to identify companies with
traits & more potential for growth in terms of sales & earnings. Meeting the management and
understanding their pedigree and the realistic business growth plan generates a strong
conviction about investing in the stock. We historically have been able to buy and hold such
growth ideas.
We shall remain invested in them as long as we see the upscaling happening and won’t be shy
to exit if we feel that we have lived the growth phase or if fundamentals don’t pan out as
expected due to company specific issues or corporate governance.
Creating the Moat or generating the alpha
What happens when a growth portfolio is created? We wait for the markets to identify and
reward the stocks. Till then how do generate some alpha out of the existing investments.
We use options to generate the additional alpha on this investments. As we know markets go
through dull phases or period of underperformance where stocks either don’t go up, correct
or just rise by a fraction. We identify companies or stocks which are going through phases of
corrections or consolidations and create short positions on them as a contra bet leveraging
on our investments. We create short positions on them through only writing of calls and do
not invest in buying puts or shorting the future. We create strategies having a bearish view
through call options.
We have been successfully able to create short positions of calls on such laggard or
underperforming stocks through the leverage mechanism on the existing investments. This
helps in generating extra alpha or money flow month on month and generate income also
during the lull periods. Historically through this strategy we have been conservatively able to
generate 1 -1.25 % monthly for our advisory clients.
Summing up the strategy
Invest in large cap names when markets are down and go up to 50 % allocation in large cap
when many opportunities are available. Invest in flexi cap growth stocks just when there
growth phase is about the start and hold them to the ride the whole growth story. Create
contra/short positions in stocks where significant correction is happening through options
and also in dull and laggard stocks. Every markets give this opportunity where few stocks
either correct or don’t perform. Generate additional alpha from shorting of this stocks.
A perfect long/short fund AIF.