The “Gateway to India Fund” aims to achieve long-term capital growth and comprises of a diversified portfolio of companies from the Indian sub-continent. The Fund concentrates on securities that are listed, traded or dealt on the stock markets in the Indian subcontinent and has a minimum of 80% of the portfolio invested in Indian securities.
Sanjoy Bhattacharyya is the “Fund Adviser” though David Cornell and Gaurav Narain manage the Fund on a day to day basis.
Let’s take a look at the latest portfolio (Top 10 holdings) of the Fund as of November 2013 (pdf).
|Stock||% of portfolio||P/E FY13||P/B FY13||5yr avg roE||5yr avg EPS Growth|
|Bank of Baroda||4.8%||5.9||0.8||20.1%||23.5%|
|Mahindra & Mahindra||3.8%||15.7||2.8||18.7%||13.9%|
What you can see is a nice mix of large cap stocks and mid-cap stocks. Keeping behemoths like ITC and ICICI Bank company in the portfolio are smaller stocks like PI Industries and Torrent Pharma.
The other point worth noting is that all the non-financial stocks have a high 5 year average ROE from 18%+. Cairn is an exception to the rule and was probably bought in anticipation that the buy back offer will boost the stock price.
Among the financial stocks, you can see a delicate balance between the Private, PSU and NBFC space. ICICI Bank has clearly been chosen over the others private banks because its’ valuations at 1.8 times book are cheaper than its peers. Bank of Baroda is at rock bottom valuations of 0.8 times book. Sundaram Finance is relatively expensive at 2.4 PBV but it does have a stellar track record which justifies the price tag.
If you look at the weightage of the sectors, you will find that financial stocks are overweight with a 20% allocation. This suggests that Sanjoy Bhattacharyya is expecting the interest rate regime to become benign in the near future.
The second highest weightage at 16.3% is taken by the Information Technology sector followed by the consumer discretionary sector at 13.6%.
However, despite the good stock selection, it has not been smooth sailing for the “Gateway to India Fund” so far because of the steep depreciation in the value of the Indian rupee. On a YOY basis, the Fund has lost 14.42% and under-performed that S&P India Select Index which lost only 12.76%. However, the figures over the 6 month and 3 month period are much better, probably thanks to the stabilization of the rupee. Over three months, the “Gateway to India Fund” has given a return of 5.53% which compares favourably to the 4.73% given by the S&P India Select Index.