Investment Analysis and Portfolio Management: Faculty in Charge: Dr. Mayank Joshipura

Investment Analysis and
Portfolio Management
Faculty in Charge: Dr. Mayank Joshipura
Submitted by: GROUP 7- Div A

Ashika Gupta | F024
Ishaan Manocha | F039
Rahul Narayan | F042
Rajat Garg | H020
Smriti Agarwal | J002
Siddharth Chopda | J011
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Investment Philosophy | IAPM

INVESTMENT OBJECTIVE
The main objective of our fund is to provide long-term capital growth opportunities to
investors through active investment management in a diversified basket of large-cap equity
stocks. The fund is for investors looking for long term gains and risk appetite to invest in a
concentrated portfolio. With that in mind, we invest in a minimum of 10 and a maximum of
30 Large-Cap securities, seeking to maximize total returns.

INVESTMENT PHILOSOPHY
We believe in delivering the highest value for our investors on a risk-adjusted basis. We will
follow a blended approach, as mentioned below:
1. Value Investing approach: We plan to invest in relatively cheaper stocks to maximize

the long-term capital appreciation and stable dividend yield. The stock should have
strong operational and equity return fundamentals with high growth potential. The
exposure in any security will be based on the proportionate risk profile of each
security indicated by the company's historical volatility and operational volatility.
2. Top-down approach: We will employ a top-down approach to identify the sectors
based on the economic outlook and would use cross-sector correlation as a tool to
reduce portfolio risk.
INVESTMENT CRITERIA
We will invest 25% in schemes of funds managed by other teams and 75% fund will be
actively managed by us; this is as per the guidelines given for the portfolio management
project.
INVESTMENT STYLE
We invest 100% of our total assets in large-cap equity securities of companies exercising the
predominant part of their economic activity in India. The entire money shall remain invested
entirely at any point in time.
We shall rebalance the portfolio every Friday if there is any material change triggering a
rebalance following our investment philosophy. Similarly, any event that can have a
significant adverse impact on the share price or future earning potential will eventually
trigger a liquidation.
We would be using NIFTY 100 as a benchmark for our portfolio. The aforesaid benchmark's
composition is such that it is most suited for comparing the scheme's performance.
METRICS TO BE CONSIDERED WHILE CREATING THE PORTFOLIO
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1. We believe that Return on Capital Employed is a critical metric in assessing a firm's
performance as it creates shareholder value. So, ROCE should have been at least
15% in the last 10 years.
2. Revenue grown should have been at least 7.5% every year during the previous 10
years.
3. Interest Coverage ration must be less than 4 as companies with high-interest
coverage ratio have reduced risk of bankruptcy.
4. ROE must be less than 12% since there earning is less than their cost of capital
5. FCFF should be consistent over the last 5 years
6. D/E ratio should be less than 1.5 (apart from Infrastructure and Industrial
Manufacturing)
7. Dividends must have been consistent over the previous 5 years.
8. Relative valuation based on the industry must be checked.
9. Quality of Management to be measured by Corporate Governance and Independent
directors and intra-group exposure for conglomerates
10. 5% of the portfolio to be reserved for ESG stocks
11. Any unforeseeable Corporate governance issue, regulatory change, debt payments
default and/or operational crisis will trigger a liquidation of the stock from the
portfolio
RISKS ASSOCIATED
We want to generate long term capital appreciation by investing in a maximum of 30 equity-
related funds. This will lead to higher volatility of our portfolio as it makes our fund a little
concentrated. Because of the same reason, the portfolio's liquidity risk is expected to be
higher compared to a regular diversified equity scheme.
However, we will diversify the portfolio by selecting stocks in different sectors such that the
risk is reduced.
FEES
The long-term nature of the fund, with its concentrated nature, would require us to employ
and actively engage highly skilled talent for a longer period. To deliver on the returns
promised any compromise on this front would lead to a detrimental result. Hence, we
deemed it necessary to keep our fixed component at 0.5% of AUM and a variable
component 0.25% of profits due to asset appreciation, which will be enforced only if the
fund surpasses the stated benchmark.
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Investment Analysis and

Faculty in Charge: Dr. Mayank Joshipura

Submitted by: GROUP 7- Div A

Investment Philosophy | IAPM

1. Value Investing approach: We plan to invest in relatively cheaper stocks to maximize

METRICS TO BE CONSIDERED WHILE CREATING THE PORTFOLIO

Investment Philosophy | IAPM

Investment Philosophy | IAPM

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