1. MULTIPLE -STRATEGY
TREND RATED
AUTOMATIC TRADING SYSTEM
Portfolio Management Services (PMS)
Performance Update
30 November 2010
Vivek Mavani – Vice President and Senior Portfolio Manager
2. BRICS Growth Synopsis
BRICS Growth is a Long only Diversified Equity Product aimed at generating Absolute Returns
The Objective is :
To generate Steady & Consistent returns over medium to long term
Maintain Low Volatility
Margin of Safety
The Focus is therefore on Stock Picking with a Buy and Hold philosophy
Invest in high quality and high growth companies at reasonable valuations and hold them
over a period of time. (Not trade in & out frequently)
Our conservative approach to managing investments, (especially during periods of volatility) is
reflected in our superior performance.
3. Portfolio Update and Outlook
Markets went through a correction in November and although the indices lost less than 10%, individual
stocks saw prices correct by 10-30% in less than three weeks
We were cautious throughout the last few months as highlighted in our previous updates
Dilemma in a Bull Market. Choice between:
Losing an Opportunity in a fast rising market
Losing money in event of an anticipated sharp correction
We were clear in our Choice. This led to short term underperformance against the benchmark’s in a
rising market but We will continue to “Stick to Our Convictions.” This was evident during the
corrective phase
Last month, we held high levels of liquid balances, (due to part profit booking) at higher levels. We
deployed part of the liquid balances at lower levels, during the corrective phase. We added Large Cap
Banks (Axis Bank), Technology (Infosys) and Capital Goods Sectors (BHEL)
Our contrarian call and conviction on ICICI Bank has yielded good results. Partly booking profits in
Axis Bank at higher levels and re-entering at lower (5-10%) levels also has had a good payoff
Although, we reduced our Mid-cap exposure especially where they had a very sharp run-up. Selectively
Mid-caps could continue to be an attractive space as individual performances are likely to shine
However, Credo of Sticking to Quality will always remain and will never be compromised
6. The comparison includes 250 Diversified Equity Funds across all Fund Houses
Ranked on 6 month returns
Compared to Top 20 Mutual Funds as of 30 Nov. 2010
Rank Scheme Name
Performance
6 Months % 1 Year %
1 Sundaram Rural India Fund - Growth 25.53 24.25
2 BRICS Growth 24.02 45.16
3 Kotak Lifestyle Fund - Growth 23.77 32.21
4 IDFC Premier Equity Fund - Plan A - Growth 23.66 38.11
5 HDFC Equity Fund - Growth 23.31 31.87
6 HSBC Unique Opportunities Fund - Growth 23.23 23.87
7 Sahara Wealth Plus Fund - VP - Growth 23.10 30.66
8 Religare Mid N Small Cap Fund - Growth 22.60 46.97
9 Reliance Quant Plus Fund - Ret - Growth 22.59 24.23
10 Sahara Wealth Plus Fund - FP - Growth 22.56 29.56
11 Sundaram Growth Fund - Growth 22.39 21.46
12 Quantum Long-Term Equity Fund - Growth 22.15 31.42
13 Franklin India Flexi Cap Fund - Growth 21.97 25.69
14 Templeton India Equity Income Fund - Growth 21.93 24.94
15 Religare AGILE Fund - Growth 21.86 14.01
16 IDFC India GDP Growth Fund - Growth 21.68 22.98
17 HDFC Mid-Cap Opportunities Fund - Growth 21.45 40.37
18 L&T Midcap Fund - Growth 21.38 27.44
19 Canara Robeco FORCE Fund - IP - Growth 21.26 36.02
20 Sundaram India Leadership Fund - Growth 21.25 23.87
7. The comparison includes 250 Diversified Equity Funds across all Fund Houses
Ranked on 1 year returns
Compared to Top 20 Mutual Funds as of 30 Nov. 2010
Rank Scheme Name
Performance
6 Months % 1 Year %
1 Religare Mid N Small Cap Fund - Growth 22.60 46.97
2 BRICS Growth 24.02 45.16
3 HDFC Mid-Cap Opportunities Fund - Growth 21.45 40.37
4 HSBC Small Cap Fund - Growth 18.65 39.10
5 Canara Robeco Emerging Equities - Growth 17.08 38.75
6 Reliance Equity Opportunities Fund - Growth 20.49 38.61
7 IDFC Premier Equity Fund - Plan A - Growth 23.66 38.11
8 DSP BlackRock Small and Midcap Fund - Growth 18.11 36.32
9 UTI Master Value Fund - Growth 20.37 36.17
10 SBI Magnum Sector Umbrella - Emerging Businesses - Growth 19.32 36.02
11 Canara Robeco FORCE Fund - IP - Growth 21.26 36.02
12 Religare Mid Cap Fund - Growth 20.32 35.96
13 Canara Robeco FORCE Fund - Ret - Growth 21.21 35.86
14 ICICI Prudential Fusion Fund - IP - Growth 19.65 34.90
15 ICICI Prudential Discovery Fund - IP - Growth 15.79 34.86
16 ING Dividend Yield Fund - Growth 17.05 34.85
17 BNP Paribas Future Leaders Fund - Growth 18.79 34.82
18 JPMorgan India Smaller Companies Fund - Growth 20.94 34.56
19 Taurus Ethical Fund - Growth 14.22 34.10
20 Kotak Midcap Fund - Growth 20.35 33.60
8. Performance has been a result of our:
Stock Picking
Low churn in the portfolio, and
Conservative attitude (not taking
excessive risks)
Our Strategy has been to :
Buy during panics/declines
Use sharp rallies to partially book
profits
Opportunistically ride the momentum
for a part of the portfolio (<15%)
Remain adequately liquid at all times
Adequate liquidity helps :
Protect against volatility
Provides enough courage and
conviction to buy into panics
Current cash/liquid balances ~ at 16% of
the Portfolio
85
90
95
100
105
110
115
120
125
130
135
140
145
150
155
160
1-Oct-09
1-Nov-09
1-Dec-09
1-Jan-10
1-Feb-10
1-Mar-10
1-Apr-10
1-May-10
1-Jun-10
1-Jul-10
1-Aug-10
1-Sep-10
1-Oct-10
1-Nov-10
BRICS Growth Nifty Sensex
S&P 500 CNX Midcap
BRICS Growth NAV v/s Indices (normalised)
BRICS Growth NAV Trend
9. Performance
Between
1 Oct. 2009 –
25 May 2010 *
Between
25 May 2010 * -
5 Nov. 2010
Between
5 Nov. 2010 ** -
30 Nov. 2010
Range bound with
volatility
Sharp rally across
the board
Correction across
the board
BRICS Growth 15.70% 36.73% -6.32%
Nifty -5.44% 31.32% -7.12%
Sensex -6.50% 31.10% -7.06%
S&P 500 -2.84% 29.86% -8.00%
CNX Mid-Cap 10.32% 31.54% -8.36%
* 25 May 2010, Indices bottomed out and then the rally started .
** 5 November 2010, Indices peaked and the corrective phase started.
BRICS Growth has delivered absolute & consistent returns across different market phases
Significant out-performance in a range bound volatile market, (Stock Picking was the Key)
Kept pace even during the sharp rally (Buy and Hold, Profit booking at higher levels)
The fall in NAV during the corrective phase was lower (Large Cash Balances, 20+%)
BRICS Growth Outperformance Trend
10. How did we do during periods of Volatility – 12 Biggest Falls between Oct.-’09 – Nov.-’10
How much a portfolio falls during a
correction / sharp downturn is as
important as how much it gains in a
bull market
Protecting capital is often more
important during periods of volatility
Downside protection equally
contributes to superior returns over a
period of time
We have managed to fall less than
the indices during each of the sharp
falls / panics since our inception
Large liquidity during periods of
volatility & a low beta portfolio helped.
*Beta measures the volatility of the
portfolio relative to the index
Against Nifty Sensex
CNX
Midcap
Beta * 0.4580 0.4577 0.5069
Date
Points
Fall -
Nifty
% Fall -
Nifty
Points
Fall -
Sensex
% Fall -
Sensex
% Fall -
BRICS
Growth
27-Jan-2010 -159.65 -3.19% -490.64 -2.92% -2.29%
03-Nov-2009 -147.80 -3.14% -491.34 -3.09% -0.36%
19-May-2010 -146.55 -2.89% -467.27 -2.77% -0.84%
25-May-2010 -137.20 -2.78% -447.07 -2.71% -1.62%
05-Feb-2010 -126.70 -2.61% -434.02 -2.68% -0.47%
27-Oct-2009 -124.20 -2.50% -387.10 -2.31% -0.65%
21-Jan-2010 -127.55 -2.44% -423.35 -2.42% -1.32%
01-Jun-2010 -116.10 -2.28% -372.60 -2.20% -1.24%
16-Nov-2010 -132.90 -2.17% -444.55 -2.19% -1.44%
26-Nov-2009 -102.60 -2.01% -344.02 -2.00% -0.95%
12-Nov-2010 -122.60 -1.98% -432.20 -2.10% -1.81%
07-Jun-2010 -101.50 -1.98% -336.62 -1.97% -0.99%
11. Portfolio Breakup
Large Cap. More than Rs 5,000 crores
Mid-Cap. Rs 1,000 - 5,000 crores
Small Cap. Less than Rs 1,000 crores
Large Cap
56.26%
Mid Cap
7.51%
Small Cap
19.98%
Cash
16.25%
Market Cap Breakup
Banking &
Finance
19.48%
Branded
Garments &
Retail
16.36%
Cash
16.25%
FMCG
9.48%
Information
Technology
11.16%
Infrastructure
& Capital
Goods
12.57%
Oil & Gas
14.70%
Sectoral Allocation
12. Low Portfolio Turnover (Buy & Hold at work)
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10
times
Portfolio Turnover
Portfolio Turnover
Turnover increased as
we partly booked
profits at higher levels
Re-deployed part of
liquid balances at
lower levels
13. Market Outlook
Global macro economic risks will continue to weigh on the markets. Will definitely have
repercussions on India. Domestic political risk, though not serious at this point cannot be under-
estimated as there could be policy freeze due to political deadlock
Excess liquidity globally flooding the Indian markets has been the primary reason for the sharp
rallies across all emerging markets. Although there is a temporary pause in the fund flows, could
resume in first quarter of 2011. Ride the momentum with funds flow, but be Selective
Although Valuations have corrected in the last few weeks, they are still not very cheap. In fact they
still look rich in some sectors although it is clearly a Buy on Declines Market
The key concern is not so much about valuations but if earnings disappoint, price corrections
in individual stocks could be sharp
In sectors/stocks where valuations factor in fairly aggressive growth rates for FY11 & FY12,
corporate performances could potentially disappoint given very high expectations
Valuations v/s growth favour Mid-caps. Mid-caps could potentially be a very big opportunity
going forward albeit with a fair degree of price volatility
Large pipeline of IPO’s (more than Rs.50,000 Crs) could be a dampener for secondary markets as
significant quantum of funds could be diverted in next 3-4 months
Pockets of opportunities still available in stocks/sectors where growth is steady and valuations still
leave room for upside. Declines/corrections in individual stocks could be used as entry points for
fresh investments
14. Our Strategy
“Time” in the markets is more important than “Timing” the markets
Superior long-term sustainable returns are not made by timing the markets in terms of selling at
the peaks. They are a result of purchase prices that are attractive in terms of valuations with
adequate Margin of Safety
Our strategy going ahead would continue to be, bottom up stock picking and be extremely
selective:
Buy on declines
Use sharp rallies to partially book profits
Opportunistically ride the momentum for only a small part of the portfolio
Remain adequately liquid at all times
The sectors that we are bullish and continue to be over weight are:
Technology (Software Services),
Banking & Financial Services,
Capital Goods and Infrastructure Construction
Oil and Gas including Gas Transportation & Distribution,
Domestic Consumption themes like Paints, Branded Garments, Media etc.
15. Thank You
Vivek Mavani – Vice President & Senior Portfolio Manager
vivek.mavani@bricssecurities.com
BRICS SECURITIES LIMITED
1st Floor, Sadhana House,
570, P. B. Marg,
Behind Mahindra Towers,
Worli, Mumbai – 400 018.
Tel: 91-22-6636 0000.
Happy Investing
