Investment Analysis and Portfolio Management – B
Portfolio Management Project
Division B – Group 9
Niketshyam Agrawal - C005
Rahul Yaduvanshi - F063
Deepti Mhatre - I034
Jay Mehta - J034
Shivam Mishra - J036
Swapnil Tasgaonkar - J060
Investment Strategy:
The philosophy of the Black Pearl Capital fund is to invest in the Indian equity market for a
long period of time to reap the benefits of stable returns over the investment tenure. The
fund has a preference towards businesses which have some form of competitive advantage,
display high earnings visibility, generate high free cash flows and have quality management.
At the same time, the fund also evaluates and invests in companies where there is any
change in business environment/management that can act as a catalyst for unlocking
intrinsic value. We also see the reasonableness of valuations. The fund focuses on
companies having strong and sustainable fundamentals along with following a blended
investment approach.
The fund follows a Top-down approach with disciplined risk management and aims at
staying fully invested in equities to save its investors’ capital from erosion and provide
attractive returns. Passively managed funds provide better returns at lower fees to the
investors, and it is with the value we provide for you in mind, we chose to manage the fund
passively. Our capital appreciation fund is a balance of growth and value stocks, ensuring
safety of its investors principal while generating attractive returns from growth investing.
The scheme of the fund follows an all equity strategy to build a concentrated portfolio,
representing a cross section of companies diversified across major sectors and market
capitalization. The portfolio aims to provide part ownership to investors in some of the best
run companies in India. These quality stocks have been carefully picked after going through
robust securities screening process, consisting of both quantitative and qualitative
parameters, with the intention of long-term growth in the fund value. The portfolio of
quality securities is well diversified across sectors such as IT, Automobile, Electric
equipment, BFSI and Chemical sector so identified, to mitigate overall risk. To enhance
future earnings prospects, investment in alpha-generating growth assets and fortnight
Rebalancing have also been taken into consideration. As the scheme is expected to be part
of the core long-term equity holdings of our investors, we have adopted a well-balanced
and prudent style of fund management that endeavours to deliver good returns at
controlled levels of risk.
The portfolio universe selected on the above basis aims to outperform the benchmark of
Nifty 500 in the Indian equity market.
Reasons Behind Success:
Strong Momentum: Momentum in the past 12 months/post COVID rebound, was one of
our criteria through which we selected our stocks and that ensured that we would have a
strong performance.
Good Management: Management Quality was used to filter out stocks from our portfolio.
We benefitted from good management commentary after their earnings calls.
Current Scenario: Several stocks benefitted from current geopolitical situation especially
regarding China. Reliance and Sterlite benefitted as several countries decided to not buy 5G
equipment from Huawei while Dixon took advantage of more manufacturing moving to
India.
Diversification: Our portfolio was diversified into various sectors such as IT,
Pharmaceuticals, Banking and Finance etc. which meant that we were not
disproportionately impacted from poor performance in any particular sector eg: Banking.
We also had a good mixture of Large, Mid and Small Caps in our portfolio which again
helped to shield us from underperformance of the Mid Cap segment.
What could have been done differently:
In the past month, Nifty Mid-caps and Small-caps Indices have seen double digit rallies,
while large caps have quite not caught up, as nifty 50 only moved up 3%. In hindsight, we
would have earned much greater returns had we put some more weight on Mid-caps and
Small-caps. Our current allocation was Large caps – 60%, Mid-caps – 25%, Small-caps – 15%.
We should have bumped up the allocation to 50/30/20.
We did not put in robust quantitative filters while selecting some stocks. Had we done that,
some of the stocks in our portfolio that did not do quite as well as their peers, like TCS
would have been eliminated, boosting our overall returns.
We started with a belief that Pharma Industry had been overbought, and chose to ignore it.
In hindsight, NIFTY PHARMA out performed our portfolio, and we could have included the
sector.
We had too many banking and finance stocks in our portfolio, and we could have devoted
some capital to other industries, like metals or consumer products instead. Apart from
diversification and lower volatility, we would have also received higher returns.
Portfolio Statistics:
Number of stocks with positive returns: 21 Number of stocks with negative returns: 3
Portfolio Attribution Analysis:
This return can be attributed -0.04% to Asset Allocation and 6.78% to Security Selection.
Brokerage Fees Paid (INR)
Date Transaction Type Transaction amount Transaction fees
13 July Buy 10000000 15000
27 July Sell 51070 77
27 July Buy 51070 77
10 Aug Sell 45637 68
10 Aug Buy 45637 68
Total transaction charges 15290
