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Conference Call with Tushar Pradhan, Fund Manager, HDFC AMC

June 16, 2006

I had an opportunity to participate in a conference call with HDFC funds manager, Tushar Pradhan. Excerpts from the call are as follows.

  • Tushar feels that the larger extent of sell off in India compared to other emerging markets is not justified. Hedge funds are supposed to be the party spoilers with large sell offs after US interest rate hike. They are looking for short term gains just like GREEDY investors. They can’t hold the stock for years, for example, Hindustan Lever., took a while for the company to turn around. More on HLL later.
  • HDFC fund conducted a review with 220 odd companies and none of the companies have changed their guidance or earnings estimate. (Courtesy: Milind Barve). Tushar also held the same view.
  • Bear market ? What ? Are you crazy ? What is a bear market ? Falling corporate earnings, falling GDP, high inflation & double digit interest rate. Do you see them in India ? No. Loud and clear, we are not heading towards a bear market.
  • Equity investments are for long term only. In the context of Indian economy, long term is a minimum of 3 years. In the context of American economy, long term is 7 years. For lumpsum investments, HDFC had launched a fund with 5 years lockin period, HDFC Long Term Equity fund. However, I advise you to go for SIP.
  • HDFC hasn’t seen significant fund outflows.
  • Corporate Profitability for 06-07 & 07-08: What has happened is, in 2001 the Indian markets bottomed out as corporate earnings hit a new low. From 2002, the situation started improving and was clearly visible in 2003. So that financial year, you might have seen a company grow 75% to 100%. In the next financial year they again grew by 50%. But that was only possible because their earnings had decelerated in 2001. From now on you won’t witness the same growth, but a modest growth of 20% is achievable.
  • On HLL: It is an excellnt company with professional management. Worldclass products and highly efficient distribution and logistics channels. During weak economy, the company suffered a lot. Took a while for it to turnaround. But with retailing boom insight, the company is well poised to take advantage of its Brands and Distribution channels. HLL is a long term story. He didn’t specifically mention to BUY or SELL this stock, but quoted as an example how Hedge Fund managers were in a hurry to dump it.
  • To a question by a MF sales person, Tushar asked them to look for a return of 12-15% over next 5 years, but I am confident they will outperform that. I expect atleast 20% compounded return. So once again, have long term view and INVEST, INVEST and INVEST on Dalal Street.
  • The overall underlying tone of Tushar was very bullish and confident for any investor who is looking from long term perspective. Also Tushar holds the opinion that Equity is the only asset class that can give superior returns in long term.

Thanks & Happy Investing!

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