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Strictly for Intended Recipients Only
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* DSP India Fund is the Company incorporated in Mauritius, under which ILSF is the corresponding share class
Dec 2021
| People | Processes | Performance |
DSP Flexi Cap Fund (erstwhile DSP Equity Fund)
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- 1. [Title to come] [Sub-Titleto come] Strictly for Intended Recipients Only Date * DSP India Fund is the Company incorporated in Mauritius, under which ILSF is the corresponding share class Dec 2021 | People | Processes | Performance | DSP Flexi Cap Fund (erstwhile DSP Equity Fund) #INVESTFORGOOD
- 2. 2 What is DSPFlexi Cap Fund? FLEXI CAP FUND INVESTS ACROSS THE MKT. CAP SPECTRUM WITHOUT ANY LIMIT ~ 2/3rd in large caps ~ 1/3rd in mid & small caps INVESTMENT PHILOSOPHY Buy quality businesses Stay invested Use corrections to average down FRAMEWORK TO IDENTIFY COMPANIES Business Strength Management Quality Growth prospects CORE + TACTICAL APPROACH Core portfolio based on long term themes Core Equity Portfolio : ~ 75%-80% Tactical Equity Portfolio : ~ 20%-25% No. of stock: ~ 50-70 Flexi Cap fund aims at investing in quality businesses with good growth prospects Source: Internal. Large-caps are defined as top 100 stocks on market capitalization, mid-caps as 101-250 stocks, small-caps 251 stock onwards. The strategy/investment approach mention above currently followed by the Scheme and the same may change in future depending on market conditions and other factors.
- 3. 3 Why invest inthe DSP Flexi Cap Fund? CORE EQUITY PORTFOLIO ALLOCATION Owns high quality companies with good growth prospects. Buys and holds for the long term Seeks opportunities across the market No need for investor to decide on large/ mid/small cap allocation Documented investment framework gives clarity on what to expect Easy to fit into overall asset allocation plan of the investor LONG TERM EQUITY INVESTMENTS ONE STOP OPTION FOR EQUITY INVESTMENTS CLEAR ROLE IN OVERALL ASSET ALLOCATION Suitable for the core long term equity allocation in an investment portfolio
- 4. 4 Investment Philosophy Business Management Growth STOCK SELECTION Frameworkfor identifying quality businesses PORTFOLIO CONSTRUCTION Core portfolio Tactical portfolio Core portfolio of quality businesses based on long term themes REVIEW & REBALANCING Stock prices Competitive positioning of quality businesses Use market corrections to add to quality business at lower prices Buy quality businesses, stay invested and use market corrections to average down costs
- 5. 5 Investment Framework (Business– Management – Growth) Market share dominance Gaining market share via rapid growth Low capex intensity High cash conversion Funding via internal accruals Low cost structure Not requiring equity dilution 1st of 3 pillars of DSP Flexi Cap Fund’s equity investment framework – Business BUSINESS Management Growth The sector(s)/stock(s)/issuer(s) mentioned do not constitute any research report/recommendation of the same and the portfolio may or may not have any current or future position in these sector(s)/stock(s)/issuer(s). Scale advantages create a virtuous cycle Vast market, small size, hunger for growth & calculated risk – taking Healthy ROEs & growth Relentless focus on cost and cash flow offsets challenges Source: Internal.
- 6. 6 Investment Framework (Business– Management – Growth) Long term orientation over opportunistic short term-ism 2nd of 3 pillars of DSP Flexi Cap Fund’s equity investment framework – Management Capital allocation Focus on core business MANAGE - MENT Growth Business Model The sector(s)/stock(s)/issuer(s) mentioned do not constitute any research report/recommendation of the same and the Portfolio may or may not have any current or future position in these sector(s)/stock(s)/issuer(s). Capital allocation directly influences growth Unrelated diversification can destroy value Short term opportunism can unravel in a downturn Source: Internal.
- 7. 7 Investment Framework (Business– Management – Growth) Superior growth rates 3rd of 3 pillars of DSP Flexi Cap Fund’s equity investment framework – Growth Competency and Perseverance GROWTH Business Model Manage - ment The sector(s)/stock(s)/issuer(s) mentioned do not constitute any research report/recommendation of the same and the Portfolio may or may not have any current or future position in these sector(s)/stock(s)/issuer(s). Converting potential opportunity into a real business Long term compounding without equity dilution Market cap growth largely tracks earnings growth Source: Internal.
- 8. 8 Investment Framework -Portfolio construction DETERMINE LONG TERM STRUCTURAL THEMES Aspirational country like India dependent on per capita income growth DIVERSIFY STOCK WEIGHTS IN PORTFOLIO No. of stocks=> ~ 50-70 Control portfolio volatility MAINTAIN MARKET CAP BALANCE IN PORTFOLIO Diversified portfolio ~ 60-70% large cap stocks ~ 30-40% Mid & Small stocks CORE ALLOCATION TO STRUCTURAL THEMES ~ 75 – 80% in structural themes ~ 20-25% in tactical ideas with turnaround triggers Seeking to capture long term growth prospects while managing risks EQUITY PORTFOLIO COMPOSITION EQUITY PORTFOLIO DIVERSIFICATION Source: Internal. Large-caps are defined as top 100 stocks on market capitalization, mid-caps as 101-250 stocks, small-caps 251 stock onwards.
- 9. 9 Investment team Atul Bhole– Managing fund since June 2016 • Atul is also the co-Fund Manager for the DSP Equity & Bond fund and the DSP Dynamic Asset Allocation Fund. • Atul has over 14 year of experience in fund management and equity research with Fund management experience since 2011 • Joined DSP Mutual Fund in May 2016 as VP – Investments. Previous work experience with Tata Asset Management (Feb 07 – Apr 16), JP Morgan & SBI treasury • Masters in Mgmt. Studies from JBIMS and has cleared his CA exam Experienced investment team with a wide coverage of Indian equity markets FUND MANAGER Years in brackets ( ) is years of experience. TEAM SUPPORTING THE FUND MANAGER Charanjit Singh (12) AVP, Capital Goods, Infra, Power Utilities, Consumer Durables Abhishekh Ghosh– Managing the fund since Jan 2021 • Over 13 year experience in equity research • Joined DSPIM in Sep 2018 as midcap analyst. Prior experience of working with Motilal Oswal in their institutional equities division • Masters in Management Studies from N L Dalmia Institute and has graduation in Electronic Engineering. Chinmay Sapre (9) AVP, Aviation, Realty Kaushal Maroo (11) AVP, Autos, Ancillaries, Cement Dhaval Gada (10) AVP, Banking and Financial Services Abhishek Rathi (13) AVP, Financials & Industrials for Long / Short Aayush Ganeriwala (2) Senior manager, Oil & Gas, Metals Suryanarayanan Manian, CFA (10) VP, Tech, Telecom, Media, FMCG Nilesh Aiya (12) AVP, Forensic Research Resham Jain, CFA (14) VP, Small & Mid Caps, Agri inputs, Textiles, Chemicals, Retail Chirag Dagli (19) VP, Healthcare Abhishek Singh (14) AVP, Portfolio Manager Bhavin Gandhi (15) AVP, Portfolio Manager
- 10. 10 Performance Scorecard Source: MFIE;Rolling Returns are since inception till Dec 31, 2021. Returns provided above are of DSP Flexi Cap Fund – Regular Plan, Income Distribution cum capital withdrawal option. Standard Deviation of DSP Flexi Cap Fund and Nifty 500 TRI is calculated on the basis of daily returns. Click here for scheme performance in SEBI prescribed format and of other schemes managed by same Fund Manager. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. The figure mentioned for performance of the index should not construe as returns/performance of the Scheme. It is not possible to invest directly in an index. DSP Flexi Cap Fund aims to provide better risk adjusted returns profile across periods ROLLING RETURNS POINT-TO-POINT RETURNS TIME PERIOD DSP Flexi Cap Fund Nifty 500 TRI ALPHA 1 year 32.4 31.6 0.8 3 years 22.0 19.1 2.9 5 years 18.7 17.9 0.8 10 years 17.4 16.7 0.7 Since Inception 19.7 15.1 4.7 DSP Flexi Cap Fund Nifty 500 TRI DSP Flexi Cap Fund Nifty 500 TRI DSP Flexi Cap Fund Nifty 500 TRI DSP Flexi Cap Fund Nifty 500 TRI Average Annual Returns 25.1 19.9 19.6 15.5 19.8 15.9 19.9 15.6 Median Annual Returns 16.6 13.5 15.5 12.8 16.2 14.3 19.9 15.9 Minimum Annual Returns -54.0 -59.5 -26.9 -21.7 0.9 -1.5 7.2 5.0 Maximum Annual Returns 154.1 154.3 85.3 69.4 64.5 51.3 33.4 26.5 Returns / Risk 1.15 0.85 0.90 0.67 0.91 0.68 0.91 0.67 1 YEAR ROLLING RETURNS (%) 3 YEARS ROLLING RETURNS(%) 5 YEARS ROLLING RETURNS (%) 10 YEARS ROLLING RETURNS (%)
- 11. 11 Performance Scorecard Source: MFIE;Rolling Returns are since inception till Dec 31, 2021. Returns provided above are of DSP Flexi Cap Fund – Regular Plan, Income Distribution cum capital withdrawal option. Standard Deviation of DSP Flexi Cap Fund and Nifty 500 TRI is calculated on the basis of daily returns. Click here for scheme performance in SEBI prescribed format and of other schemes managed by same Fund Manager. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. The figure mentioned for performance of the index should not construe as returns/performance of the Scheme. It is not possible to invest directly in an index. DSP Flexi Cap Fund aims to provide better risk adjusted returns profile across periods AVERAGE ROLLING RETURNS RETURN PER UNIT OF RISK 25.1 19.6 19.8 19.9 19.9 15.5 15.9 15.6 0.0 5.0 10.0 15.0 20.0 25.0 30.0 1 yr RR 3 yr RR 5 yr RR 10 yr RR DSP Flexi Cap Fund Nifty 500 TRI 1.15 0.90 0.91 0.91 0.85 0.67 0.68 0.67 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1 yr RR 3 yr RR 5 yr RR 10 yr RR DSP Flexi Cap Fund Nifty 500 TRI
- 12. 12 Portfolio details –sector exposures Significant exposure in Financials, Materials and Consumer discretionary sector during Atul’s tenure Source: Morningstar; GICS Classification has been considered for sectoral break-up. Portfolio data as on Dec 31 2021. The sector(s)/stock(s)/issuer(s) mentioned in this note do not constitute any recommendation of the same and the Fund may or may not have any future position in these sector(s)/stock(s)/issuer | More than 10% allocation highlighted in Orange and more than 5% allocation highlighted in grey Sectors Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Energy 10.1% 7.2% 6.8% 4.6% 1.0% 3.1% 3.1% 0.6% Materials 12.8% 13.0% 14.6% 15.6% 11.9% 11.3% 10.3% 11.5% 16.8% 15.8% 15.9% 16.3% Industrials 10.0% 18.9% 17.6% 16.6% 15.9% 13.6% 10.4% 7.4% 6.2% 7.1% 8.4% 8.2% Consumer Discretionary 14.3% 10.8% 11.3% 12.6% 15.0% 12.1% 9.4% 10.4% 10.0% 7.8% 12.2% 12.5% Consumer Staples 4.9% 5.7% 7.4% 4.7% 7.3% 8.2% 10.2% 7.7% 6.8% 5.8% 6.0% 8.2% Healthcare 7.6% 6.7% 2.1% 4.1% 6.4% 7.2% 6.9% 7.7% 6.4% 6.7% 6.4% 5.5% Financials 25.3% 25.5% 31.8% 27.9% 32.0% 34.3% 40.4% 41.1% 34.0% 34.8% 36.4% 36.0% Information Technology 8.5% 5.6% 3.6% 3.8% 7.4% 8.2% 8.7% 4.4% 4.8% 9.7% 7.4% 8.3% Communication Services 1.2% 2.7% 6.1% 3.2% 1.1% Utilities 2.9% 5.0% 3.7% 4.9% 1.2% 0.8% 1.0% 3.3% 3.9% 4.2% 3.5% Real Estate 2.2% 2.1% 1.7% 0.9% Total Equity 96.4% 98.3% 98.8% 96.1% 98.0% 95.7% 97.3% 98.2% 96.5% 99.5% 99.4% 98.5%
- 13. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 MARKET CAP BREAKUP Large Cap Mid Cap Small Cap 13 Portfolio details – concentration and market cap trends Significant increase in stock & sector concentration during Atul’s tenure • Market cap tilt towards large cap. • Increase in Mid/small cap exposure recently 59% 26% 14% Source: MFIE; Portfolio data as on Dec 31, 2021. The sector(s)/stock(s)/issuer(s) mentioned in this note do not constitute any recommendation of the same and the Fund may or may not have any future position in these sector(s)/stock(s)/issuer. Large-caps are defined as top 100 stocks on market capitalization, mid-caps as 101-250 stocks, small-caps 251 stock onwards. 36% 65% 81% 20% 30% 40% 50% 60% 70% 80% 90% Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 SECTOR CONCENTRATION TRENDS Top Sector Top 3 Sector Top 5 Sector 27% 41% 56 30 35 40 45 50 55 60 65 70 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 STOCK CONCENTRATION TRENDS Top 5 stocks (LHS) Top 10 stocks (LHS) Total No of stocks
- 14. 14 Top Holdings ason Dec 31, 2021 Source: Internal. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. The sector(s)/stock(s)/issuer(s) mentioned in this presentation do not constitute any research report/recommendation of the same and may or may not have any future position in these sector(s)/stock(s)/issuer(s). APPLYING THE INVESTMENT FRAMEWORK IN STOCK SELECTION & PORTFOLIO CONSTRUCTION Investment framework is the key driver for building portfolio positions Core Portfolio Holding, Tactical Portfolio Holding TOP 5 STOCKS PORTFOLIO WEIGHT (%) BUSINESS MANAGEMENT GROWTH COMMENTS ICICI BANK LIMITED 8.48 ✓ Right mix of retail & corporate loan ✓ Strong franchise in terms of branch network & technology ✓ Focused on profitable growth with granularity ✓ Advances growth expected to be better than industry average ✓ Possibility of strong earnings growth for next 2 years ✓ Core banking business attractively valued with probability of rerating HDFC BANK LIMITED 6.18 ✓ Strong process driven organization ✓ Optimal mix of profitable retail segment ✓ Focused on consistent profitable growth ✓ Prudent in credit quality and ALM management ✓ Advances growth expected to be better than industry average ✓ Possibility of strong earnings growth for next 2 years ✓ Steady compounding of earnings can provide comfort ✓ Franchise continues to strengthen INFOSYS LIMITED 4.18 ✓ Strong business model, shifting from just labor arbitrage to partner providing solutions ✓ Ability to re-orient, re-train towards new technologies ✓ Management’s growth strategies playing out ✓ Continuity of culture, values despite management changes ✓ Investments in & flexibility to front sales team started to yield results with many large deal wins ✓ Currently have industry leading growth with strong profitability & return parameters ✓ Co has made a comeback with leadership changes & resultant sharper focus on front end ✓ Co is now back to industry leading growth AVENUE SUPERMAR T LIMITED 3.89 ✓ Solid value proposition for value cautious Indian customer with EDLC-EDLP framework ✓ Cluster-based approach to expansion ✓ Thoughtful online foray with D- Mart Ready ✓ Very thoughtful assessment of India opportunity, customer behavior ✓ Conviction around business model ✓ Consistent execution ✓ Faster store addition based on land purchased during Covid ✓ More working hours post covid ✓ Coming back of high margin general merchandise ✓ Inflation helps retailers to report higher growth ✓ Higher proportion of pvt labels ✓ Huge opportunity & multi- year higher growth rate ✓ Internal accruals to back the growth ✓ Optionality to build a profitable online grocery format ULTRATECH CEMENT LIMITTED 3.83 ✓ Largest cement player in India with pan- India presence ✓ Better mix with higher exposure towards north, west & central ✓ Continued capacity addition ✓ Significant cash flow generation ✓ Successfully built largest Co in India through pulling off strategic acquisitions ✓ Timely & controlled use of debt to expand ✓ Strong cement demand with Infra & real estate pick-up ✓ Co growing faster than industry & improving market share ✓ Pricing power & cost savings can provide much better profitability growth & cash generation ✓ Strong growth to provide operating leverage & cost saving driving profitability ✓ Significant cash generation & deleveraging can add to the equity returns
- 15. 15 Current investment outlookand portfolio positioning MARKET OUTLOOK Market Valuations Nifty has seen some correction & now trading at ~19x FY23 which is in order given growth profile US Fed might start tapering & raising rates sooner but seems to be discounted Earnings growth expectations Potentially strong earning growth outlook for next 2 years with low base, pent-up demand & commodity inflation. Earnings can double in 4-5 years from FY20 levels. ~ 20-25% allocation to TACTICAL portfolio KEY SECTORS Financials Materials Healthcare Consumer Discretionary ~ 75-80% allocation to CORE portfolio KEY RISKS Global supply-chain issues Global supply-chains issues continuing longer than expected impacting commodity prices & recovery process adversely Volatility in energy price Geo-political unstability Passing on raw material prices & impact in demand In the short run, companies may face challenges to procure raw material and may not be able to pass on the raw material inflation impacting margins PORTFOLIO POSITIONING Positioning the portfolio to capture an economic recovery Source: Internal. The sector(s)/stock(s)/issuer(s) mentioned in this presentation do not constitute any research report/recommendation of the same and may or may not have any future position in these Excesses in certain pockets Excesses in areas like Crypto, new age tech stocks, valuation in unlisted space. Any correction in these areas may invite sharp volatility across asset classes India’s macro getting stronger Employment generation & wage growth over few years with better exports, infra, real estate & consumption pick up Strong nominal GDP growth & buoyant tax collections Accommodative monetary policy Bond inclusion in global indices
- 16. Scheme Product Suitability Riskometer DSPFlexi Cap Fund Benchmark - Nifty 500 TRI DSP Flexi Cap Fund (Flexi Cap Fund - An open- ended dynamic equity scheme investing across large cap, mid cap, small cap stocks) This Open-ended equity scheme is suitable for investors who are seeking* Long-term capital growth Investment in equity and equity- related securities to form a diversified portfolio 16 Disclaimer & Product Labeling Details In this material DSP Investment Managers Private Limited (the AMC) has used information that is publicly available, including information developed in-house. Information gathered and used in this material is believed to be from reliable sources. The AMC however does not warrant the accuracy, reasonableness and / or completeness of any information. The data/statistics are given to explain general market trends in the securities market, it should not be construed as any research report/research recommendation. We have included statements / opinions / recommendations in this document, which contain words, or phrases such as “will”, “expect”, “should”, “believe” and similar expressions or variations of such expressions that are “forward looking statements”. Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc. The sector(s)/stock(s)/issuer(s) mentioned in this presentation do not constitute any research report/recommendation of the same and may or may not have any future position in these sector(s)/stock(s)/issuer(s). The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. All figures and other data given in this document are as on Dec 31, 2021 (unless otherwise specified) and the same may or may not be relevant in future and the same should not be considered as solicitation/ recommendation/guarantee of future investments by the AMC or its affiliates. Investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication or consequence of subscribing to the units of DSP Mutual Fund. For scheme specific risk factors and more details, please read the Scheme Information Document, Statement of Additional Information and Key Information Memorandum of respective Scheme available on ISC of AMC and also available on www.dspim.com. For Index disclaimer click here The strategy mentioned has been currently followed by the Scheme and the same may change in future depending on market conditions and other factors. Large-caps are defined as top 100 stocks on market capitalization, mid-caps as 101-250 , small-caps as 251 and above. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. *Investors should consult their financial advisors if in doubt about whether the Scheme is suitable for them.
- 17. For Professional Investoruse only 13 #INVESTFORGOOD