Premium Portfolio - Interview with Mr. Pankaj Pandey

'We believe time spent in the market is essential rather than timing the markets'.
'More so, we believe that earnings growth is one of the most important aspects to a stocks long term performance'. Likewise, Mr. Pankaj Pandey, Head- Retail Research, ICICI Securities, has shared his insights on Premium Portfolios, continue to read more…



1. ICICIdirect is in the forefront of innovation in equity products. We keep on hearing about a lot of new products, like 'Premium Portfolio' - What is it all about?

Premium portfolios are specially curated thematic portfolios focused on value creation for shareholders through investing in fundamentally strong companies with good future price prospects at attractive valuations. The portfolio invests using bottom up approach with core principles being, management pedigree, superior return ratios and growth prospects.

2. How is this different than investing in Mutual Funds? For new & existing investors, which is a better option to invest among the two?

Mutual funds and Wealth premium portfolios are two very different ball games. Mutual funds can have stocks in the range of 30-40 whereas our premium portfolios are much more concentrated and generally have 15-25 stocks. Furthermore, mutual funds schemes are much more on the broader side of things whereas our premium portfolios are specifically curated based on a particular theme. e.g. Capex Plays Portfolio, Infra & Real Estate Portfolio etc.

3. It is believed that direct stock investing is risky, the recent example being the sharp downward price movements in Adani group stocks. How is this risk taken care of while managing these equity portfolios?

The Idirect Research team handpicks the stocks after undergoing extensive fundamental check across sectors and companies through various qualitative and quantitative measures. The process includes a 360 degree check across the fundamentals of the company. This also involves meeting the management of the companies, meeting competitors, plant visits, doing channel check for continuous monitoring and asses the future performance of the company

4. What is the core investment philosophy that is followed while constructing these portfolios?

The Investment team uses bottom-up style of investing wherein key parameters include capital efficient business, robust growth prospects, low debt and sound financials. The team does not follow necessarily a contrarian approach, hence not aiming to buy cheapest stock and sell expensive stocks. Stocks are cheap and expensive for reasons best known. However, valuation comfort is also an important factor that is considered.

5. With so much options, how should investors decide which portfolios to select for investment? If I am an investor looking to invest in 2-3 portfolios, which strategies should I consider and what should be the basis of this decision?

The principle factor that affects the decision making of an investor is his risk appetite combined with return expectations. If an investor is risk averse and only looks to achieve stable compounded returns, then he may opt for Equity Frontline Portfolio. However, if one is hungry for higher returns and do not mind taking some incremental risk, then he may opt for the Leaders of Tomorrow portfolio. Similarly, an investor can choose from a plethora of thematic portfolios which are specific to a particular theme.

6. Growth or Value – which style do you prefer while creating the portfolios?

We do not identify our investment pattern as Growth or Value specific. More so, we believe that earnings growth is one of the most important aspects to a stocks long term performance. However, quality at any price can also be harmful and lead to diminished returns. Hence, we like to invest in established businesses, with strong growth visibility at an attractive valuation.

7. Ideally, what is the investment universe that you track to select any stock specific idea? Are there any quantitative filters in your stock selection approach?

The IDirect Research team has a coverage universe of more than 300 companies across various sectors. The Research team carries out fundamental analysis and due diligence is done across sectors/companies by respective sector analysts and various in-house financial screeners. After thorough analysis of companies and brain storming among the portfolio team members, we arrive at the constituents and weightage of the stocks in the portfolio. In terms of qualitative filters, key parameters include capital efficiency, healthy balance sheet and superior return ratios.

8. Couple of existing portfolios are betting on companies that will benefit from the aggressive policies initiated by the Government – PLI Scheme, Atmanirbhar Bharat. What do you think on the results of implementing these policies?

We believe augmenting the manufacturing base in India and driving the infrastructure cycle is the key prerogative of the Government if it needs to achieve the goal of taking India to $5 trillion economy. On the same lines, the Government has promulgated PLI schemes and Atmanirbhar mission to expand the manufacturing base and kick start capex cycle by gibing more opportunities to home grown companies. This in our view have a multiplier effect in terms of huger requirement for capital goods, high job creation which in turn will drive consumption demand.

9. Broader markets – Mid & Small Caps – have beaten Nifty 50 in the last few months. Do you expect the trend to continue? Which portfolios should investors choose to benefit from this trend?

We believe that mid cap and small cap do perform in any Bull market. The choice to invest between them and large caps depends on the investors risk appetite, time horizon and understanding of business models of mid-small cap companies. Going ahead, we do believe mid cap and small cap domain to do well but one has to stick to discipline and methodology of picking up the same. We do have launched various portfolios like leaders of tomorrow, Equity Growth, Unorganised to Organised, Logistics for 5 trillion GDP, Export Champions. All of this have a mid/small cap flavour but are anchored on different themes. So one has to understand thesis of the individual portfolio and depending on his/her understanding can take exposure to the above portfolios

10. How do you correct the portfolio if it goes overweight on a few stocks?

Research team will conduct a quarterly review of all the premium portfolios. Portfolios and stocks will be evaluated based on defined quantitative screeners for each portfolio and consequently the risk reward perspective would be constructed keeping in mind long term investment objectives.

11. Ok, but how often do you plan to rebalance in the portfolios? Do I get a notification when my portfolio is due for rebalancing?

The rebalancing of the portfolios will happen every quarter which will be supported a presentation on all the individual portfolios. The presentation will highlight the performance of the portfolios vis-à-vis their respective benchmarks and also suggest the addition and deletions that has to happen at that point of time. In some specific cases, there might be a rebalancing in between two quarters if there is any sudden change with the fundamentals of any respective portfolio stock.

12. With markets at all-time high, what is your general advice to all investors – stay invested / exit partially / add more funds?

Our strategy and advice to all investors is simple. We believe time spent in the market is essential rather than timing the markets. Yes, there can be volatility and corrections but the same should be used to add to quality businesses that have a decent track record of creating wealth backed by strong business model and capable management adhering to strong corporate governance practices.

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