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Mr. Nitin Bajaj is Fund Manager of the Fidelity India Special Situations Fund and the recently launched Fidelity India Value Fund. Mr. Bajaj joined Fidelity International in 2003 as a research analyst in London.
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After a very successful and highly rated period in research, in 2007, he became an Assistant Portfolio Manager for Global Special Situations Fund in the UK with a remit to search for investment opportunities globally. As a research analyst, he covered European food and tobacco and large cap Italian and Spanish banks.Prior to joining Fidelity, Mr. Nitin Bajaj was at KPMG in India for four years working as a business analyst. Mr. Bajaj holds a Bachelor of Commerce degree from the University of Delhi and an MBA from Insead, Singapore. He is a member of the Institute of Chartered Accountants of India.
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Brief Snapshot of Funds Managed by Nitin Bajaj |
Interview |
| 1) How are investors likely to benefit from the timing of this Value Fund given the current uptick in equity markets? |
Earlier this year, when the markets were at their lowest, almost any stock one picked could well have been a value stock. At today’s market levels, stock picking is that much more challenging as market valuations do not look cheap. But it is in a market like this that Fidelity’s strong research capabilities help in uncovering value stocks. Such times call for strict valuation discipline to ensure that you are buying stocks where expectations are low and valuations are on your side. The Fidelity India Value Fund aims to do just that.
I believe that there are enough undervalued stocks because value investing is not simply about low P/Es. I will be looking for stocks with valuation anomalies that are likely to emerge as a result of over-pessimism about certain stocks or sectors, or a sector is in the midst of a multi year paradigm shift or the drivers of change for an industry are underestimated.
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2) In addition to the research capabilities of Fidelity, what additional value addition can investors expect in the selection of scrips for Fidelity India Value Fund? |
I would say that it would be staying true to the value investing discipline while picking stocks for this portfolio. That to me means understanding, in-depth, the business of each company that this Fund will invest in based on intensive research. That would involve speaking not just to the management of the company but also its customers, suppliers and competitors. This will help me have a sense of what the business is worth, what is the margin of safety I have and the risk - reward payoff for every investment decision that I am making for this Fund. This process will, of course, complement that of our research analysts in uncovering valuation anomalies. |
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3) Apart from the PE value what other key indicators are assessed in stock picking of the Value Fund? |
P/E is just one valuation metric that I will use in identifying valuation anomalies. As I said earlier, my approach to valuation starts with gaining a solid understanding of the business. This helps me arrive at the valuation metrics that will be the most appropriate for valuing that particular stock. For example, for a consumer focused business, P/E and Price/Sales would provide sufficient insight. On the other hand, for a cyclical commodities business where earnings fluctuate from time to time, P/E alone will not suffice as it will move depending on the cycle the business finds itself in. The appropriate valuation metric for commodities, then, would be Price / Replacement Value.
Once I have arrived at an intrinsic value for a stock, I focus on current valuations because in value investing it is critical to buy a stock at a good price – one that reflects the intrinsic value but also provides a margin of safety
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4) Will the valuation decisions be strictly relative to the peer group or has the management team developed a standard cut-off? |
At Fidelity, each fund manager is responsible for decisions pertaining to his portfolio. We do not have a team approach. I’ve just described my approach to valuations and picking stocks. I’d like to reiterate that I buy stocks where the risk-reward is in my favour. |
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5) Will the approach be top down or bottom up? Will there be sector specific bets taken? |
I’d like to reiterate that in keeping with our bottom-up approach to investing, we will be looking for value plays at a company / stock level and we will not be taking a sector view, i.e. we will not have sector allocations. If the portfolio shows sector overweights, it is likely to be a result of our positions in and conviction about certain stocks in that sector rather than a sector call. |
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6) Could you throw some light on the decision to maintain a 10 per cent cap on exposure to foreign equity assets? Do you expect there to be more value opportunities in India?
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The point is not so much whether there are more value opportunities in India or outside, as much as to go wherever I find stocks with valuation anomalies. I’ll be looking to generate returns for investors by investing in undervalued stocks, wherever they are. To that end, the investments in international equities will be opportunistic, for example, in a sector that is not represented in India. Fidelity’s extensive global research network will help us find these stocks. |
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7) What are the risk management processes in place at the AMC? |
Fidelity’s approach to risk management is two-fold. One part focuses on regular reviews by the CIO and the Risk / Oversight teams. The second part uses technology to provide a daily, up-to-date view of portfolio structure, risk profile, performance as well as stock level performance attribution and style analysis. |
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