Mr. Rouhak Shah

Fund Manager - Equity Motilal Oswal Asset Management Company

Mr. Rouhak Shah has more than 14 years of overall experience in the field of Equity Dealing, Technical Analysis, good command on Developing Risk Parameters for avoiding financial risk, etc. Prior to his association with MOAMC, he has worked with ICICI Prudential Life Insurance Limited & Kotak Life Insurance Limited as an Equity Trader. Mr. Shah is an MBA in Finance from CIMR, Masters in Commerce, Bachelor of Management Studies.


Q1. The evolving geopolitical situation in West Asia, rising oil prices, high interest rates, election in the coming months are some of the challenges faced by Indian markets. What are your thoughts on the situation?

Ans:

  • Risk of Oil prices flaring up: Oil prices have receded sharply and are now below USD80/bbl on slower Chinese/European growth and prospects of more Venezuelan crude coming to the market. We had discussed last period that as an economy our tolerance limit here has improved to over USD100/bbl. Lower than USD80/bbl crude should help improve current account deficit projections.

  • Risk of higher US bond yields sustaining for longer: Lower than expected inflation reading caused US bond yields to sharply correct. From close to 5%, 10 year yields have dropped to approximately 4.5%. However, this is a marginal change and while it can cause some amount of short covering led inflows, case for structural FPI inflows is still weak. But domestic flows are proving to be structural. They strengthened in the past period when the market was confronted with several uncertainties, again proving the long term faith in the equity markets.

  • Risk of Upcoming Elections: If we look at the performance of the market 6 months before the elections, over the past 8 elections, only once was the returns negative. Similarly, over past 8 elections, only twice were the returns negative six months’ post elections. We believe that post Covid, the ability of policy makers to provide protection to Industry is higher as every country wants more manufacturing internally on supply chain issues. Hence a lot of the present supportive policies could be expected to continue.

Q2. Will there be further sell-offs in mid caps and small caps? Is it appropriate to assess or analyse that right now?

Ans: The earnings growth in the midcap and small cap part of the market continues to be better than what the large cap indices are experiencing. This has a large influence of supportive government policies and should continue to provide better growth till policy environment continues to be supportive. High forex reserves enables our policy makers to continue to focus on growth especially since outlook on forex reserves is good on account of lower CAD and inclusion in global bond market indices. Given the strong presence of the growth themes in the midcap and smallcap space, we do expect the space to continue to perform on a relative basis. This should continue till policy stays supportive.

Q3. What are your checkpoints at the time of investing in an IPO? How many have you tracked in the last 6 months?

Ans: We follow the same process at the time of investing in an IPO as we do for other stock selection process. We specialize in Growth Investing with overlay of Proprietary QGLP Framework. Focus on high growth with margin of safety on valuations.

Motilal Oswal AMC’s Investment Philosophy is captured in its self‐coined acronym of QGLP (Quality, Growth, Longevity, and Price).

Quality - Quality of a company is reflected in its ability to deliver superior returns on capital invested while treating stakeholders in a consistently fair way. This ability should be deep‐rooted and hence sustainable. Quality itself can be characterized into two dimensions ‐ Quality of Business and Quality of Management

Growth – Focus on selecting companies, where return on capital employed / return on equity is higher than its Cost of Capital over a cycle.

Longevity – Ensuring longevity of growth by investing in sustainable themes identified by the investment team collectively.

Price - Price of a stock has to be seen in conjunction with the Value it offers. Price is what investors pay, value is what they get. Therefore, stocks are attractive only when they are priced less than the value perceived in them. Pricing can be evaluated by the measures like P/E, PEG, and DCF.

Q4. What are the red flags that you consider at the time of stock selection?

Ans: For identifying the red flags while stock selection, we focus on the “Q” i.e. Quality part of our QGLP (Quality, Growth, Longevity, and Price) investment philosophy.

Quality - Quality of a company is reflected in its ability to deliver superior returns on capital invested while treating stakeholders in a consistently fair way. This ability should be deep‐rooted and hence sustainable. Quality itself can be characterized into two dimensions ‐

Quality of Business and Quality of Management.

  • Stable business, preferably consumer facing

  • Huge business opportunity

  • Sustainable competitive advantage

  • Management team with integrity and competence

  • Healthy financials & ratios

Companies failing on any of the above metrics shall be filtered out during the selection process

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