Mr. Vinit Sambre

Senior Vice President, Head – Equity Investments , DSP Mutual Fund

Vinit Sambre is Head – Equities at DSP Investment Managers. He has been managing the DSP Micro Cap Fund since June 2010 and is also the Fund Manager for the DSP Small and Mid Cap Fund. Vinit specializes in the small and mid-cap space and has over 20 years of relevant work experience.

Vinit joined DSPIM in July 2007, as Portfolio Analyst for the firm's Portfolio Management Services (PMS) division, which manages discretionary accounts and provides advisory services to institutional clients. As a research analyst, his focus was on sectors like Pharmaceuticals, Power Utilities, Chemicals, Fertilizers and Textiles.

Previously, he was with DSP Merrill Lynch as a part of its Global Private Client business. He spent 20 months at DSP Merrill Lynch as Equity Strategist. Prior to DSP Merrill Lynch, he was employed with IL&FS Investsmart Limited as an Equity Analyst in their PMS division. He has also worked with UTI Investment Advisory Services as Equity Analyst for the offshore fund - India Growth Fund. Vinit is a Chartered Accountant from Institute of Chartered Accountant of India.

Q . The Total Expense Ratio (TER) is charged based on the category of the scheme under the new expenditure structure that SEBI introduced for mutual funds. Will this result in a change in investors' general buying habits for mutual funds or for a certain class of schemes?

Answer : The Total Expense Ratio (TER) is the fee charged by mutual funds to cover their operational expenses, such as management fees, administrative costs, and other expenses incurred while running the fund. SEBI (Securities and Exchange Board of India) recently introduced a new expenditure structure for mutual funds, which categorized mutual funds into various categories, and prescribed a different expense structure for each category.

This new expenditure structure is expected to impact investors' buying habits for mutual funds, particularly for the funds falling under the high TER category. Since investors tend to compare mutual funds based on their returns, a higher TER could affect the returns, making the funds less attractive to investors.

However, it is worth noting that investors should not make investment decisions solely based on TER. Other factors, such as the fund's investment objective, past performance, risk profile, and investment style, should also be considered before making investment decisions.

Q . Investors have developed a faith in the markets over the period. What do you think about how investor behaviour has changed, taking into account the current investors. Do you still believe they are making investments based on herd mentality, loss-aversion bias, etc.? What is your point of view?

Answer : It appears that investors' behavior has transformed over time, and the current cohort of investors is more knowledgeable and educated about investing. They seem to exhibit a higher level of maturity in their decision-making than they did two decades ago. Rather than overreacting to negative news, investors today view market volatility as a chance to enhance their exposure and purchase units at a lower valuation. This was not always the case in the past. Furthermore, investors have become increasingly aware of the advantages of investing for the long term, which can help them in their wealth creation journey and allow them to achieve their objectives. philosophy, the Union Budget had little in terms of outright populism. The broader push towards infrastructure, manufacturing, agriculture, and tax rationalization was consistent with the direction chosen over the last few years.

Q . How do you play different themes across your portfolio, and where do you exercise extra caution while choosing any sector/ a stock?

Answer : Our investment framework involves maintaining diversified portfolios, allowing us to explore companies across various sectors. We prioritize companies that exhibit the following characteristics:

• Potential for sustained long-term growth that surpasses their peers,
• Strong and dedicated management,
• Efficient capital utilization with a return on capital employed (ROCE) of at least 15-16%, and
• Low leverage.

Over the years, we have steered clear of companies with poor capital allocation records, excessive debt levels, and businesses that are vulnerable to disruption due to technological advancements or regulatory changes.

Q . The logistics sector in India seems one of the most promising sectors looking at the government’s focus towards infrastructure. What is your opinion? Are you positively invested in this sector?

Answer : Although the logistics sector holds long-term potential, we have refrained from investing in it due to its poor track record in terms of capital efficiency. However, if logistics businesses can demonstrate sustainable superior capital returns, we would consider exploring investment opportunities in this sector.

Q . Looking forward towards the global market, the markets seem volatile. While, India is not parallel to these prevailing global market trends. Do you still advise staying handy on equity funds? Or should we consider making some changes in our current asset allocation instead?

Answer : The Indian economy's long-term prospects have never looked as promising as they do now. This is due to the speed of reforms, increased infrastructure investments, and government initiatives to improve the ease of doing business. Additionally, India's demographics, with its expanding working-age population, ensure that our economy will experience superior long-term growth. Considering these factors, we hold a positive long-term outlook for equities and advise investors to stay invested and capitalize on any market volatility to increase their equity exposure.

We have weathered uncertain market environments before, and the market has consistently emerged stronger. Over the long term, earnings growth has been the key factor driving returns, and markets have reflected that growth. Despite the current uncertain environment, companies have continued to invest in future growth, further increasing our confidence about their future growth prospects.

Further, equities are among the few asset classes capable of beating inflation over the long term, as companies adjust prices to cover inflationary costs. Therefore, for investors seeking to beat inflation, equity remains a relevant category, and their allocation should be appropriately tailored to their risk tolerance and investment objective.

Q . Mutual funds are enhancing its digital capabilities with cloud infrastructure, automation, AI and speech analytics. Do you vision such advancements to achieve efficiency in returns for MFs?

Answer : Certainly, the advancements in digital capabilities such as cloud infrastructure, automation, AI, etc. have the potential to enhance the efficiency of mutual funds (MFs) and ultimately help in taking better decisions.

For instance, cloud infrastructure allows MFs to store and process large amounts of data, making it easier to analyze and make informed investment decisions. Automation, on the other hand, enables MFs to execute repetitive tasks, freeing up fund managers to focus on higher-value activities such as research and analysis. AI can also help to uncover insights and patterns in data, which can guide in our investment decisions.

We are exploring these technologies, however it is premature to discuss them in detail at this stage.