Series 53 – ITUS Portfolio – Transition of Market Caps in 2023

In our prior weeks content, we shared a report from KKR ‘s view how India Story remains a powerful one and what drives this story on the ground. Today we are talking about our portfolio shift in market caps and how we look at positioning today.

In response to inquiries about the movement of our portfolio from Small and Midcap to a large cap-focused approach, we aim to address this topic this week. Throughout our history, we’ve maintained an active portfolio management, with a churn rate of 20%. Our investment philosophy is far from being stagnant; we are not Buy, Hold, Forget investors. As a multi-cap fund, we adapt our allocations across market caps based on where we identify growth opportunities and where valuations align with our comfort levels. Valuation is a critical consideration for us, and it becomes qualitative and relevant with the growth visibility. When contemplating shifts in market cap exposure, we prioritize companies that presents higher growth rate rather offer a compelling risk premium. Our approach to risk goes beyond simply categorizing businesses by their market cap. Our focus on risk has been on evaluating the management teams driving these businesses and managing the liquidity aspect of our investment decisions.

Interestingly, we’ve observed a convergence in RoE between Small Cap and Nifty indices, alongside a decline in earnings yield for the small cap index (as shown in the chart below). This trend suggests a reduction in the risk premium associated with small caps. Consequently, we’ve made strategic adjustments to our portfolio, significantly cutting risks from small and midcap and transitioning towards a large cap-focused allocation.

Also, continuously keeping you informed about our SIP program is a key commitment for us as SIP presents investors with a convenient avenue to regularly infuse capital into their portfolios. Feel free to check out the benefits for your clients. If you need more info, reach out to your dedicated relationship manager at [email protected].

These weekly episodes are now available in our website for your quick read and you may access the same in the below link.

Weekly Enlightenment Archives – ITUS Capital