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* DSP India Fund is the Company incorporated in Mauritius,under which ILSF is the corresponding share class
Sep 2021
| People | Processes | Performance |
DSP Mid Cap Fund
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DSP Mid Cap Fund
- 1. [Title to come] [Sub-Titleto come] Strictly for IntendedRecipients Only Date * DSP India Fund is the Company incorporated in Mauritius,under which ILSF is the corresponding share class Sep 2021 | People | Processes | Performance | DSP Mid Cap Fund #INVESTFORGOOD
- 2. 2 What is theDSP Mid Cap Fund? MIDCAP FUND INVESTS PRIMARILY IN MID CAP STOCKS ~ 2/3rd in midcaps ~ 1/3rd in large & small caps INVESTMENT PHILOSOPHY - durable businesses - run by able managers - high sustainable ROEs FRAMEWORK TO IDENTIFY COMPANIES BusinessModel Management Quality Reasonable Valuation LONG HOLDING PERIOD Investee companies withstrong business modelsrequire time for realizingtheirgrowth potential Mid-cap fund investing in quality businesses with good growth prospects Source: Internal.
- 3. 3 Why invest inthe DSP Mid Cap Fund? SATELLITE EQUITY PORTFOLIO ALLOCATION Small businesseswhich can witnesssignificant growth potentially resultinginsuperior investmentreturns Midcap investinghas significantriskof value destruction.A robust & repeatable investment frameworkpotentially mitigatesthisrisk Documentedinvestment frameworkgivesclarity on what to expect Easy to fit intooverall asset allocationplanof the investor ALPHA GENERATION POTENTIAL FRAMEWORK TO ELIMINATE POTENTIAL VALUE DESTROYERS CLEAR ROLE IN OVERALL ASSET ALLOCATION Suitable for a satelliteallocation in an investment portfolio Source: Internal.
- 4. 4 Investment Philosophy Mid capstockscanhave the potential to grow at exponential ratesbut are also highly volatile. They may be more susceptible to economic cycles andless likely to weather economicdownturns Durable businesses run by able managers,generatingsuperiorROEs sustainably,are sources of alpha. Buy & hold companies to potentiallycreate value over time and eliminate value detractors FOR MIDAND SMALL CAP EQUITIES
- 5. 5 Probability of migratingupwards from mid cap status Probability of upward migration Mid Cap Mega Cap 8.5% chance during 2000 – 2005 4.5% chance during2005 – 2010 12% chance during 2010 – 2015 Probability of downward migration Mid Cap Small Cap 46.5% chance during2000 – 2005 51% chance during2005 – 2010 44% chance during 2010 – 2015 Eliminatingthe likely value destroyers becomes a principle consideration Source: Mid to Mega – 20th Wealth Creation Study by Motilal Oswal. Sample set for Indian Mid Caps – 200 largest listed companies after the top 100 listed companies Substantially higher probability of a Mid cap getting demoted to a Small Cap rather than graduating to be a Mega Cap MIDCAPS – WEALTHCREATIONV/SWEALTHDESTRUCTIONPROBABILITIES
- 6. 6 Investment Framework –3 pillars Simple and predictable Large sector with a high growthpotential Competitive advantage Positive cashflows and high ROEs On the cusp of a turnaround SupremeIndustries–Largestplasticprocessor Financials, Healthcare,Agriculture IPCA - Fully integrated pharmaceutical company with the lowestcostmanufacturing 5 Year averageROEof someof our investeecompanies Identified chemicalcompaniesAtulLtd and SRF Ltd early Consistentprofitgrowth Massiveturnaround inROE P/Ere-rating 1st of 3 pillars of our investment framework – Business Model Business Model Management Valuations 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). Source: Internal.
- 7. 7 Investment Framework –3 pillars Passionand ownership Past track record Prudentcapital allocation AtulLtd –has grownbusinesswith strict financialdiscipline Basic check forall portfolio companies Basic check forall portfolio companies SRF - diversificationfromcommoditized technical textilesto high entry barrier businessessuchasspecialty chemicalsand refrigerantgases 2nd of 3 pillars of our investment framework – Management team Credible and capable Manage - ment Valuations Business Model 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). Source: Internal.
- 8. 8 Investment Framework –3 pillars Handlingexpensive valuationscenarios Hyper expensive scenarios Market corrections Assessed on businessstrengthand managementquality Investin companiesattheborderlineof our framework dueto valuationcomfort May stop fresh inflows Opportunity to consolidateportfolioby selling ‘mediocre’holdingsand add highquality names 3rd of 3 pillars of our investment framework – Valuations Reasonable valuation Valuations Business Model Manage - ment 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). Source: Internal.
- 9. 9 Buy & HoldV/S Sell Discipline High Convictionholding Higher concentrationin the portfolio Add to holdingduringmarket corrections During bear phases – seek to add value creators while eliminatevalue destroyers Profitable positionswhere valuations rise to unsupportable levels Trim / book profits Loss-makingpositionswhere investment thesisnot unfoldingasenvisioned Cut losses/ Sell Significantdeterioration in fundamentals Corporategovernanceissues Fraud or misrepresentationof facts BUY& HOLD FOR LONGTERM VALUE CREATION SELL DISCIPLINE TO AVOIDVALUE DESTRUCTION Source: Internal.
- 10. 10 Investment team Vinit Sambre–Fund Manager • 21 years of investment experienceacross 4 major market cycles • Joined DSP in July 2007 as a Portfolio Analyst. • Previously worked withDSP Merrill Lynch as a part of its Global PrivateClient business as an Equity Strategist • CharteredAccountant from ICAI Charanjit Singh (12) AVP, Capital Goods, Infra, Power Utilities, Consumer Durables TEAM SUPPORTING THE FUND MANAGER Experienced investment team with a wide coverage of Indian equity markets FUND MANAGERS* *Jay Kothari is Dedicated Fund Manager for overseas investments. Years in brackets ()is years ofexperience. ReshamJain – Co-Fund Manager • Joined DSPIMin March 2016 covering small and midcaps • Previously working as an analyst with Batlivala & Karani stock broking • M.Sc in Finance (ICFAI University), FRM (Cleared), CFP (Cleared) , CFA (US) Chinmay Sapre (9) AVP, Aviation, Realty Abhishek Ghosh (12) AVP, Small & Mid Caps, Transportation Kaushal Maroo (11) AVP, Autos, Ancillaries, Cement Dhaval Gada (10) AVP, Banking and FinancialServices Abhishek Rathi (13) AVP, Financials & Industrials for Long / Short Aayush Ganeriwala Manager, Oil& Gas, Metals Suryanarayanan Manian, CFA (10) VP, Tech, Telecom, Media, FMCG Nilesh Aiya(12) AVP, ForensicResearch Chirag Dagli VP, Healthcare Abhishek Singh (14) AVP, Portfolio Manager Bhavin Gandhi (15) AVP, Portfolio Manager
- 11. 11 Performance Scorecard Source: MFIE;Scheme Benchmark – Nifty Midcap 100 TRI. Rolling Returns are as on Sep 30,2021 for DSP Mid Cap Fund, Regular Plan Growth Option. Rolling Frequency is daily. Standard Deviation considered for Returns / Risk calculation in the above table is calculated on the basis of daily returns. Click here for scheme performance of above Scheme 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 Mid Cap Fund can provide better risk adjusted returns profile across periods ROLLINGRETURN(%) POINT-TO-POINT RETURNS(%) DSP Mid Cap Fund Nifty Midcap 100 TRI DSP Mid Cap Fund Nifty Midcap 100 TRI DSP Mid Cap Fund Nifty Midcap 100 TRI Average Annual Returns 20.4 17.8 16.7 12.7 16.8 12.9 Median Annual Returns 12.3 9.2 15.5 13.2 16.8 12.7 Minimum Annual Returns -60.5 -61.6 -7.6 -12.4 3.1 -2.1 Maximum Annual Returns 163.6 161.3 43.4 39.7 30.5 26.5 Returns / Risk 1.07 0.81 0.88 0.58 0.88 0.59 1 YEAR ROLLING RETURNS (%) 3 YEARS ROLLING RETURNS(%) 5 YEARS ROLLING RETURNS (%) TIME PERIOD DSP Mid Cap Fund Nifty Midcap 100 TRI ALPHA 1 year 50.4 80.5 -30.1 3 years 22.5 22.1 0.4 5 years 16.0 15.7 0.3 Since Inception 16.1 14.3 1.9
- 12. 12 Performance Scorecard Source: MFIE;Returns are as on Sep 30, 2021 for DSP Mid Cap Fund, Regular Plan Growth Option. Rolling frequency is daily. Click here for scheme performance of above Scheme in SEBI prescribed format and of otherschemes managed by same Fund Managers. Past performance may or may not sustain in future and should not be used as a basis for comparisonwith 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. AVERAGE ROLLINGRETURNS RETURN PER UNIT OF RISK 20.4 16.7 16.8 17.8 12.7 12.9 0.0 5.0 10.0 15.0 20.0 25.0 1 yr RR 3 yr RR 5 yr RR DSP Mid Cap Fund Nifty Midcap 100 TRI 1.07 0.88 0.88 0.81 0.58 0.59 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1 yr RR 3 yr RR 5 yr RR DSP Mid Cap Fund Nifty Midcap 100 TRI
- 13. 13 Portfolio details –sector exposures Significant exposure in Financial, Materials, Consumer Discretionary, Industrials & Healthcare during Vinit’stenure Source: Morningstar; Portfolio data as on Sep 30, 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 Jul-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Sep-21 Energy 0.9% 1.0% 4.0% 4.1% 5.8% 3.0% 3.6% 2.1% 1.2% 1.1% 0.3% Materials 15.5% 13.6% 13.5% 10.3% 10.1% 11.1% 18.2% 15.1% 17.2% 19.3% 19.4% 21.2% 22.0% 21.2% 25.9% 22.5% 18.9% 16.7% 19.9% Industrials 19.3% 16.0% 16.3% 19.9% 20.8% 25.2% 21.5% 27.2% 22.5% 18.8% 18.3% 14.2% 15.2% 14.3% 15.1% 12.2% 10.7% 10.0% 12.8% Consumer Discretionary 14.7% 20.3% 11.6% 12.2% 15.0% 13.9% 9.9% 11.5% 15.2% 16.8% 14.8% 16.4% 17.7% 12.4% 16.7% 19.9% 18.8% 19.7% 20.2% Consumer Staples 7.0% 6.8% 9.2% 6.2% 1.3% 1.5% 2.6% 1.4% 1.3% 2.6% 3.2% 1.7% 3.8% 3.3% 4.0% 3.8% 4.9% 4.3% Healthcare 5.5% 7.4% 10.5% 11.7% 6.8% 1.6% 5.2% 10.0% 6.6% 6.0% 6.2% 8.5% 9.4% 11.0% 10.2% 11.6% 15.1% 9.8% 6.9% Financials 16.7% 27.6% 23.7% 17.1% 24.7% 29.3% 17.7% 19.8% 19.4% 19.9% 26.3% 21.2% 24.5% 19.0% 18.1% 15.4% 17.1% 20.8% 20.7% Information Technology 8.2% 5.8% 9.9% 12.8% 10.7% 5.1% 3.3% 1.6% 3.7% 3.1% 2.0% 3.8% 2.9% 3.0% 0.7% 3.7% 3.8% 7.5% 6.3% Communication Services 1.2% 1.0% 1.2% 6.6% 1.8% 2.4% 3.1% 0.4% Utilities 2.8% 0.6% 1.2% 3.5% 3.7% 2.3% 4.9% 4.9% 2.7% 1.6% 1.5% 1.2% 1.4% 1.4% 1.4% 1.7% 2.6% 3.1% Real Estate 3.5% 1.1% 0.9% 1.7% 2.1% 1.4% 1.3% 1.6% Total Equity 91.8% 99.1% 96.0% 98.9% 97.5% 97.6% 92.1% 95.8% 94.4% 90.1% 92.5% 91.1% 96.0% 86.9% 93.0% 92.8% 91.4% 93.3% 96.2%
- 14. 14 Portfolio details –concentration and market cap trends Source: MFIE; Portfolio data as on Sep 30, 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. Market Capitalization range from Jan 2018 is taken from data published by AMFI. Data prior to Jan 2018 is calculated from MFIE. Large-caps are defined as top 100 stocks on market capitalization, mid-caps as 101-250 stocks, small-caps 251 stock onwards. Has always been a diversified portfolio with significant mid cap bias 18% 33% 48 35 40 45 50 55 60 65 70 75 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% Jul-12 Sep-13 Nov-14 Dec-15 Feb-17 Apr-18 Jun-19 Jul-20 Sep-21 STOCK CONCENTRATIONTRENDS Top 5 stocks (LHS) Top 10 stocks (LHS) Total No of stocks 21% 61% 80% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Jul-12 Sep-13 Nov-14 Dec-15 Feb-17 Apr-18 Jun-19 Jul-20 Sep-21 SECTOR CONCENTRATION TRENDS Top Sector Top 3 Sector Top 5 Sector 0 10 20 30 40 50 60 70 80 90 100 2012 2013 2014 2015 2016 2018 2019 2020 2021 MARKET CAP BREAK UP Large Cap Mid Cap Small Cap 13% 68% 15%
- 15. 15 DSP Mid CapFund - Top Holdings as on Sep 30, 2021 Source: Internal. Past performance may or may not sustain in future and should not be used as a basis for comparisonwith other investments. The sector(s)/stock(s)/issuer(s) mentioned in this presentation do not constitute any researchreport/recommendation ofthe same and may or may not have any future position in these sector(s)/stock(s)/issuer(s). TOP 5 STOCKS PORTFOLIO WEIGHT(%) COMMENTS BUSINESS MANAGEMENT VALUATION Supreme Industries 4.96 Expected to gain market shareledby increased capacity across geographies Strongexecutionand focused on capital efficiency Stable& Conservative ReasonableValuation Manappuram Finance 3.54 Corebusinessof Gold financinglikely to remain insulated despite challenging times Focus on increasingthe shareof other business vertical likeMicroFinance, Housingfinance,Vehicle financealongwith core gold financebusiness Stable& Conservative ReasonableValuation IPCA Laboratories 3.44 Positivebusiness momentumin Indiaand ROW;Optionality in US business Try to maintaincost leadership through scale and integration Stable& Conservative ReasonableValuation AtulLtd. 3.36 Focus on utilizingthe capacity builtover the lastfewyears Focus on integrated model, Diversified business verticals Stable& Conservative ReasonableValuation SBI Life Insurance Co 3.13 Demonstrated strong premiumgrowth & improving margin trajectory Focus on gainingmarket sharedriven by quasi sovereignbrand and leveragingSBI’slarge branch& customer base Stable& Conservative ReasonableValuation APPLYINGTHE INVESTMENTFRAMEWORK IN STOCK SELECTION& PORTFOLIO CONSTRUCTION Investment framework is the key driver for buildinghigh conviction positions Positive/Improving trajectory Negative/Declining trend Neutral/No Change
- 16. 16 Current Investment Outlookand Portfolio Positioning MARKET OUTLOOK Market is showing good recovery across most sectors. Even during severe Covid 2nd wave, we saw much better performance from the companies compared to wave 1. FUNDPOSITIONING Durable,diversified portfolio built for the long term Source: Internal. 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. *Source: Factset; Portfolio data as on Sep 30, 2021 KEYRISKS POSITIONING* Key things to monitor 1) Sustainability of demand given high inflationary headwinds especially crude 2) Change in accommodative monetary stance 3) Manufacturing tailwinds with China + 1 strategy / PLI / supply chain disruptions due to high logistics cost (near term). Possible tapering in USA & its impact on yield, global flows Rising concerns on China Macros. Top Overweights Supreme Industries Atul SBI Life Top Sector Financials Consumer Discretionary Materials Top Weights Supreme Industries ManappurramFinance IPCA Labs Earnings Trajectory We expect earnings growth to remain strong in the coming quarters supported by demand and low base. However, we expect some moderation in margins owing to inflationary environment. Our portfolio positioning has largely remained same in last 1 year with some marginal tweaks. Some of our key holdings has not delivered returns in line with market over the last 1 year which has impacted our performance (e.g. Alembic Pharma, Whirlpool, City Union Bank, Coromandel etc.) Many of these names are high conviction holdings for us and we have been adding during weakness. The current holdings can deliver returns over medium term. We also expect our portfolio can withstand sharp drawdown relatively better than themarket.
- 17. 17 DSP Mid CapFund – Portfolio as on Sep 30, 2021 Source: Internal. Past performance may or may not sustain in future and should not be used as a basis for comparisonwith other investments. The sector(s)/stock(s)/issuer(s) mentioned in this presentation do not constitute any researchreport/recommendation ofthe same and may or may not have any future position in these sector(s)/stock(s)/issuer(s). APPLYINGTHE INVESTMENTFRAMEWORK IN STOCK SELECTION& PORTFOLIO CONSTRUCTION Investment framework is the key driver for buildinghigh conviction positions TOP 20 HOLDINGS % OF NET ASSETS Supreme Industries Ltd. 4.96 ManappuramFinance Ltd. 3.54 IPCA LaboratoriesLtd. 3.44 Atul Ltd. 3.36 SBI Life Insurance Company Ltd. 3.13 Jubilant Foodworks Ltd 2.92 Bata India Ltd. 2.89 Balkrishna Industries Ltd. 2.88 MaxFinancial Services Ltd. 2.87 Cholamandalam Investment and Finance Company Ltd. 2.83 Voltas Ltd. 2.74 ICICI Bank Ltd. 2.65 City Union Bank Ltd. 2.58 Coromandel InternationalLtd. 2.54 Mindtree Ltd. 2.52 Federal BankLtd. 2.45 Container Corporation Of India Ltd. 2.44 HatsunAgro Product Ltd. 2.44 Bharat ForgeLtd. 2.39 Whirlpool of India Ltd. 2.31 MARKETCAP NET ASSETS LargeCap 14.6% Mid Cap 68.4% Small Cap 13.1% Materials, 19.9% Industrials,12.8% Consumer Discretionary, 20.2% Consumer Staples, 4.3% Healthcare, 6.9% Financials,20.7% Information Technology, 6.3% Communication Services, 0.4% Utilities, 3.1% Real Estate, 1.6% GICS Sectorclassification
- 18. Scheme Product Suitability Riskometer DSPMid Cap Fund Benchmark- NiftyMidCap 100 TRI DSP Mid Cap Fund (Mid Cap Fund-An open ended equity scheme predominantly investing in mid 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 predominantly ofmidcap companies 18 Disclaimer This document is for information purposes only. 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 statements contained herein may include statements of future expectations and other forward looking statements that are based on prevailing market conditions / various other factors and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. While utmost care has been exercised while preparing this document, the AMC nor any person connected does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The recipient(s) before acting on any information herein should make his/their own investigation and seek appropriate professional advice. There is no assurance of any returns/capital protection/capital guarantee to the investors in any schemes of DSP Mutual Fund (‘Fund’). The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. 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 herein do not constitute any research report/recommendation of the same and the scheme/ Fund may or may not have any future position in these sector(s)/stock(s)/issuer(s). The strategy / investment approach / framework mentioned herein is currently followed by the scheme and the same may change in future depending on market conditions and other factors. All opinions, figures, charts/graphs and data included in this document are as on 30 Sep 2021 (unless otherwise mentioned) and are subject to change without notice. For scheme specific risk factors, Investment strategy & objective, asset allocation and more details, please read the Scheme Information Document, Statement of Additional Information and Key Information Memorandum of scheme available on ISC of AMC and also available on www.dspim.com. For Index disclaimer click here Large-caps are defined as top 100 stocks on market capitalization, mid-caps as 101-250 , small-caps as 251 and above. The strategy mentioned has been currently followed by the Scheme and the same may change in future depending on market conditions and other factors Mutual Fund investmentsare 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.
- 19. For Professional Investoruseonly 13 #INVESTFORGOOD