Nippon India Vision Fund - Direct Plan - Bonus Plan INF204K01E96

Beyond the Securities and Exchange Board of India-regulated restrictions of the funds, the fund house has documented internal guidelines for each of its funds; these act as guardrails for the fund managers. For the Vision fund, the key features are that the active share of the fund is restricted from 55% to 70%, barring any exposure to small caps, and a 4% exposure cap for individual mid-cap names.

Fund management responsibilities are shared between Kalkundrikar and Agarwal on the basis of sectors. Both managers ply a similar growth-at-a-reasonable-price strategy. The key focus is on identifying and picking stocks with dependable growth prospects and limited downside. Although mispricing opportunities are sought out, valuations are a secondary consideration provided that the companies meet the fundamental criteria.

Kalkundrikar typically scouts for companies with strong and sustainable business models. He is averse to taking excess risk through aggressive sector calls. Thus, his portfolio is characterized by longer holding periods and lower churn. Agarwal prioritizes superior operating margins, consistent revenue growth, and efficient working capital cycles when shortlisting candidate companies. Also, given the cyclicity and sensitivity to regulatory changes of the companies within his sleeve, Agarwal has a more fluid approach toward position sizing. This approach enables him to take advantage of mispricing opportunities in a dynamic geopolitical and regulatory environment. Outside of quantitative metrics, the other factors are corporate governance and capital allocation efficiency.

From a performance objective perspective, the stability of returns is given precedence over the tendency to generate outsize returns by taking lopsided bets.

This is a benchmark-aware diversified strategy that invests in a combination of large- and mid-cap stocks. Large-cap stocks generally constitute more than 60% of the portfolio, while mid-caps form the remaining 35%-40%. Although the fund is permitted to have an active share of up to 70%, the active share generally tends to be closer to the lower band of 55%.

The portfolio is currently underweight in key sectors such as financials, energy, and basic materials. On the other hand, the fund is relatively overweight in sectors such as industrials, technology, consumer discretionary, and healthcare. Typically, the portfolio has had long holding periods for most of its stocks, but fund managers may indulge in a few short-term trades and tactical plays to capitalize on short-term opportunities. The risk-aware investment process means that fund managers tend not to stray away from the top stock exposures in the benchmark. It also leads to a fairly long tail of small positions. That said, the portfolio continues to be well-diversified, constituting around 70–75 holdings, much fewer than the 90-plus names in the portfolio when the current fund managers took over. Over time, the fund managers have trimmed some of the minor constituents and consolidated positions.