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Index of presentation ➢ SECTION 1: Sundaram Blue Chip Fund – Slides 3 to 24 ➢ SECTION 2: Economy Update & Outlook – Slides 25 to 41 ➢ SECTION 3: Market Outlook – Slides 42 to 48 2
WHY SUNDARAM BLUECHIP FUND? 3
Why are LARGECAPS attractive? Large caps are the top 100 companies by market capitalization in India(SEBI definition). Large caps are attractive for the following reasons. • Proven business models • Size matters – benefits of scale and competitive moats that come in from size • Stability across business cycles • Management bandwidth is wide and deep • Strong balance sheets aid ability to acquire capabilities and growth through M&A • High liquidity • Well-researched universe 4
How consistent is the return potential in LARGECAPS? Nifty 50 Long Term Returns Large caps have consistently compounded over long term (11% CAGR over 15 and 20 years) The data is taken from Aug 2000 to Aug 2020 for Nifty 50 5
NIFTY 50 TTM PE 10.0 15.0 20.0 25.0 30.0 5.0 - 03/2011 06/2011 09/2011 12/2011 03/2012 06/2012 09/2012 12/2012 03/2013 06/2013 09/2013 12/2013 03/2014 06/2014 09/2014 TTM PE (Nifty Ex-Top10) 12/2014 03/2015 06/2015 09/2015 12/2015 03/2016 Nifty TTM PE 06/2016 09/2016 12/2016 03/2017 06/2017 09/2017 12/2017 03/2018 06/2018 09/2018 12/2018 03/2019 06/2019 09/2019 12/2019 03/2020 06/2020 6
HOW IS VOLATILITY IN LARGECAPS? Rolling returns 3 years 5 years 10 years Category Nifty Nifty Nifty Nifty Nifty Nifty Nifty Nifty Nifty Mid Cap Small Cap Mid Cap Small Mid Cap Small 100 100 100 100 100 100 Cap 100 100 Cap 100 Maximum 48% 50% 70% 25% 25% 30% 18% 20% 22% Average 13% 14% 12% 11% 13% 10% 11% 13% 10% -8% -14% -21% -2% -3% -10% 4% 4% -1% Minimum • The upside of returns is higher in Midcap and Smallcap but with high volatility which is not the case with large caps Stable returns is seen in large caps across horizons with relatively lower drawdowns • Data is taken from Jan 2004* to Aug 2020 • 7 * Latest inception date is Nifty Small Cap 100 Index on 01-01-2004; Total Observations: 3 years: 4,992; 5 years: 4,261; 10 years: 2,435
WHY STOCK PICKING MATTERS IN LARGECAPS? CAGR 1 Year 2 Years 3 Years 5 Years 6 Years 7 Years 6.20 0.61 5.36 8.94 9.29 14.33 Bluechip Category Average 4.56 (0.39) 3.94 8.00 8.45 14.05 Large Cap Category Average 4.29 (0.99) 4.97 8.60 7.56 12.74 S&P BSE 100 TRI Returns Excess Returns 1 Year 2 Years 3 Years 5 Years 6 Years 7 Years 1.64 1.00 1.42 0.94 0.84 0.27 Bluechip Category Vs Large Cap Avg 1.91 1.60 0.39 0.34 1.73 1.59 Bluechip Category Vs S&P BSE 100 TRI Source: Value Research. The Bluechip Category refers to the funds with “ Bluechip ” in their name. Currently, there are 7 funds with the name Bluechip. The returns considered are of Direct Plans as of August 31, 2020 8
WHY STOCK PICKING MATTERS IN LARGECAPS? Nifty 50 returns vs consistent 30 stocks returns 282 280 255 234 230 205 180 155 130 105 80 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Nifty levels Consistent 30 stocks 30 stocks that are consistently present on Nifty 50 (for the past 10 years) have delivered higher returns compared to Nifty 50 index Note: Data is taken from CY09 to CY19 for calculation purposes. Calculation methodology: 30 stocks that were consistently present in Nifty 50 between CY09 and CY19 are taken. Cumulative market cap performance of the stocks are rebased to 100 and compared with Nifty 50 levels rebased to 100. 9
WHY STOCK PICKING MATTERS IN LARGECAPS? Nifty 100 returns vs consistent 46 stocks returns 300 289 275 250 225 240 200 175 150 125 100 75 50 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 NSE100 levels Consistent 46 stocks 46 stocks that are consistently present on Nifty 100 (for the past 10 years) have delivered higher returns compared to Nifty 100 index Note: Data is taken from CY09 to CY19 for calculation purposes. Calculation methodology: 46 stocks that were consistently present in Nifty 100 between CY09 and CY19 are taken. Cumulative market cap performance of the stocks are rebased to 100 and compared with Nifty 100 levels rebased to 100. 10
SOME EXAMPLES OF LARGE CAPS.. .. Which Have Compounded In The Long Term 11
DILIGENT AND DISCIPLINED INVESTMENT PROCESS External Research Fund Mangers+ Fund Mangers+ RESEARCH TEAM Published Information Economist Economist Idea Flow & Company Visit Research Fundamentals & Idea Management Generation Recommended Assessment List of Stocks/ Securities Norms Executive Internal Investment Approval Committee Committee APPROVED BUY LIST Sector and Stock Limits/ Issuer & Fund Themes/ Fund Security Allocation Limits Positioning STOCK/ SECURITY SELECTION Construction Portfolio T op-Down Bottom-Up Stock Picking/ Approach Asset Quality Evaluation & External Ratings Best Trade Execution Diversification Fund Portfolio Risk Management Liquidity 12
FUND STRATEGY Investing style – Diversified. There is likely to be 45-50 stocks Benchmark: NIFTY 100 TRI SEBI Category: Large cap Midcap contribution will be maximum at 20% Portfolio construction will be based on bottom-up fundamental stock picking blended with top-down sectoral and macro trends 13
BEDROCK OF THE FUND Sundaram Bluechip Fund (Large Cap Fund) Diversified (No of Three pronged Stocks, Bluechip Quality Concentration Risk, Framework Sector Bands) Blend of Growth and Value 14
SECTOR SELECTION DIVERSE PERFORMANCE ACROSS SECTORS 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2.7 -56.9 204.2 37.6 -20.4 40.3 7.3 52.0 -0.6 9.4 32.1 -22.1 -11.3 BSE Auto 61.1 -52.2 83.9 33.4 -31.6 56.7 -9.4 65.0 -9.9 7.3 39.1 5.3 20.7 BSE Bankex 117.3 -65.0 104.3 9.2 -47.7 34.7 -5.6 50.4 -8.5 -3.3 40.0 -1.6 -10.0 BSE Capital goods 94.6 -72.5 97.8 67.9 -16.9 46.1 -24.6 66.2 24.0 -6.3 101.9 -8.8 20.9 BSE Consumer Durables 25.1 -21.2 46.6 27.8 2.4 45.6 10.4 19.2 2.2 3.3 31.5 10.6 -3.6 BSE FMCG BSE Healthcare 17.3 -35.3 75.9 33.5 -14.2 37.2 21.1 48.4 15.3 -12.9 0.5 -5.9 -3.5 -10.4 -52.8 133.6 26.2 -17.6 0.8 55.2 17.6 4.3 -8.0 10.8 24.9 9.8 BSE IT 121.5 -74.0 233.7 1.1 -47.2 19.1 -10.0 7.9 -31.2 36.7 47.8 -20.7 -11.9 BSE Metals 115.3 -54.5 73.1 1.2 -29.0 13.1 3.7 12.0 -3.4 27.2 34.0 -15.6 7.2 BSE Oil & Gas 122.1 -59.8 74.3 -6.3 -39.9 10.9 -14.6 23.0 -6.4 1.5 19.8 -16.1 -3.6 BSE Power BSE Realty -82.1 69.5 -25.9 -51.8 53.4 -32.1 8.5 -13.6 -6.0 106.4 -31.1 26.8 153.0 -56.0 71.4 -5.8 -34.3 10.2 -13.7 20.4 -4.0 10.2 29.7 -14.9 -7.3 BSE Utilities 59.7 -55.3 85.0 15.7 -25.7 30.0 5.9 32.3 -3.2 3.6 31.5 1.2 9.6 BSE100 Source: Bloomberg; Calculation: In house; Data is based on CY 15
KEY SECTOR CALLS OVER CY 17-19 2017 2018 2019 Financials IT Financials • • • Top • Consumer Staples • Financials • Consumer Over Performers • Consumer Staples weight Discretionary • Telecom Bottom • Healthcare • Metals • Metals Under IT Healthcare weight Performers • • 16
STOCK SELECTION STRATEGY Centered around “3 pronged BLUECHIP QUALITY “ framework ” Quality of management Quality of business model Quality of financials Capable and credible management teams Strong competitive positioning & sustainable Attractive ROE/ROCE • • • with strong corporate governance competitive advantage • Strong cash flow generation • Strong process and systems which come • Healthy balance sheets with scale and size Strong franchise which has seen many • business cycles It will be a blend of GROWTH & VALUE STOCKS 17
BLUECHIP FUND- RISK-RETURN POSITIONING Thematic/Sectoral Equity Small Cap Equity Mid Cap Equity Multi Cap Equity Large Cap Aggressive Hybrid Return Equity Savings Fund Conservative Hybrid Medium Duration Short Duration Liquid Low Return to High Return Low Risk to High Risk 18
SUITABILITY TO INVESTORS Need • Capital appreciation over medium to long term with lower volatility Solution Investment in equity and equity-related securities of large cap companies • 19
SELECT FOCUS VS BLUECHIP Portfolio construction will be different on the following risk elements and metrics while both products will focus on the large cap market cap curve (80-100% in large caps) Fund/Category Select Focus/Focused Bluechip/Large cap Number of stocks 30 stocks ~45-50 stocks Portfolio style Concentrated Diversified Risk-reward Relatively higher Diversification reduces volatility Concentration risk Risk is higher in Focus with top 10 stocks forming ~60% of Risk is lower in Bluechip with top 10 stocks forming ~40-45% the portfolio of the portfolio Extent of Underweight/ Focus will continue to take a few high conviction bets with Bluechip will be more diversified across sectors and stocks. Overweight larger overweight and underweight in stocks & sectors and Extent of overweight and underweight – in sector bands & sometimes being absent in certain benchmark sectors and stock bands will be narrower in Bluechip vs Focus – thus stocks closer to benchmark, yet active and not too passive GARP bias Blend of growth & value Investing style Benchmark Nifty 50 TRI Nifty 100 TRI 20
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