ETMarkets Fund Manager Talk: Looking to beat benchmark returns? This algo trade-driven smallcase manager has a time-tested plan

The volatility in equities and other asset classes this year made it essential for money managers to adopt tactical allocation and diversification in order to minimise risks for investors.

Sonam Srivastava, a IIT Kanpur student-turned smallcase manager who is fascinated by algorithmic trades, shares her strategy on portfolio allocation to make benchmark-beating returns.

“Momentum continues to be our strongest strategy, and our multi-factor approach continues to give good performance at low risk,” Srivastava, the founder of Wright Research, told ETMarkets in an interview.
Edited excerpts”

Indian equities have recovered sharply from their June lows and hit fresh record highs. Do you see the momentum sustaining, or would you call for some caution?
The market this year has been driven primarily by one thing - the US interest rates. Any sign of dovishness by the central bank is a significant relief for the market, while hawkishness spooks them.

However, we have seen recovery come back to the market after the inflation numbers cooled.

I see this momentum sustaining for the near term and am optimistic about all-time high numbers being broken.

Still, the inflation is way above the target levels, and the geopolitical situation is also unstable, so I would not be surprised if the volatility persists.

In any case, we are very bullish about different opportunities in the market that will continue to outperform.

How much AUM do you manage, and how has your fund’s performance been so far in 2022?
We advise on roughly Rs 200 crore in assets currently deployed across various strategies. Most of our strategies have outperformed the benchmarks this year, but have seen volatility. Momentum continues to be our strongest strategy, and our multi-factor approach continues to give good performance at low risk.

Our New India strategy, which bets on new economy sectors, also shines this year.

How have you managed the market volatility and enhanced returns for your clients?
Risk management forms the core of our investing philosophy. We look at the market in a different light in different market regimes and allocate accordingly.

We have been robust in light of the global volatility and have used tools like diversification, tactical allocation, and systematic deallocation to reduce the risk of our portfolios.

India outperformed global peers in 2022 because of the upbeat domestic outlook, which saw preference tilting towards domestic-linked companies from export-oriented sectors. Do you see this phenomenon staying through in the near term?
I do see a revival of the domestic sector, going forward. The outlook for the domestic sector, especially consumption and banking, remains increasingly positive.

Moreover, with an optimistic growth projection in the near term, the capital expenditure in the economy will continue to be robust. Thus, cyclical sectors like logistics, manufacturing and real estate will also grow.

Therefore, we are betting on the domestic phenomenon for the near term.

What are your top holdings, and have you rejigged your portfolio recently? Any new entries or exits in your portfolio?
We continue to have strong positions in the banking, financials and automobile sectors. Some of our top holdings are Bank of Baroda, Solar Industries, and ITC.

We recently rejigged our portfolio to eliminate some long-held technology stocks and some overvalued ones. We have added stocks in the banking, oil and gas, consumer discretionary and chemical sectors.


What would be your top bets for 2023?
We are betting on the banking sector to continue its robust performance. We expect consumption to stay a strong theme.

We are also betting on the revival of the domestic cyclical market. Our big bets are lined up on these themes.

Finally, we remain data-driven on the re-entry onto the technology theme and will watch how that story unfolds.


Equity funds have seen sustained flows in 2022 month after month. Do you see a similar trend in 2023, or could one see more money moving to debt funds?
We expect the fund flow to be robust in 2023 for the equity market. India’s extreme attractiveness will drive this to the global investor and the rocketing growth of the Indian retail investor to become a significant part of the market.

Moreover, in a high-interest rate environment leading up to 2023, I would not be surprised to see debt getting the due fund flow.

SIP contributions have increased significantly, and retail investors have shielded Indian markets from global shocks. Do you see the trend continuing? Any ballpark figure you see by the end of FY23?
We are overly optimistic about the growth of the retail investor. Retail investor growth in India broke out in 2020, and this trend continues to gain momentum.

Our strong belief in retail investor growth comes mainly from the confidence we see in our investors. The SIP flow crossed Rs 13,000 crore per month in October, and we see the levels going to Rs 15,000 crore by the end of FY23

Tell us about yourself. What inclined you towards equities and what was the turning point?
I am an IIT Kanpur graduate with more than ten years of experience creating trading algorithms. I am fascinated by numbers and love seeing numerical methods in action in the real world.

So obviously, quantitative finance is my field of passion.

During my journey, I gained the confidence that I could build a business out of my deep passion for quant investing.

I love the markets and the field of artificial intelligence with a similar passion, and I am grateful that our investors appreciate our methodology which is a mix of factor investing and predictive methods.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)