Looking for high growth companies is obvious for a mid and small-cap fund manager, but what separates Sunil Singhania from the rest is the way he scouts for outsized opportunities which are yet to be identified by the market. The chief investment officer of the country’s third-largest fund house, who also manages over Rs.5,000 crore across two mid and small-cap funds, is also influenced by the well-known book A Zebra in Lion Country. Written by famous small-cap fund manager Ralph Wanger, the book mentions that moving out of one’s comfort zone to look for opportunities, where the rest of market fears to tread fetches higher payoffs. Not surprising that the Reliance Small Cap Fund has generated a 34% annualised return over the past three years, better than the 21% clocked by the Nifty Free Float Mid Cap 100 Index. In an interaction with Outlook Business, Singhania elucidates on how he zeroes in on potential multi-baggers and the big investing themes in store.
You have been in the market for the past two decades. What, according to you, has changed in all these years and how have your thoughts as an investor shaped up?
Evolution is an on-going process and it’s no different for the stock market. After five years, if I get the opportunity to be interviewed again, I would say a lot has changed. But the one big development that has transpired over the past two decades is the closer integration of India with the global economy. Currencies, trade, valuations... everything is interlinked. The world is as flat as it can get. Today, whatever happens globally, be it a new trend or technology, comes to India at a much faster pace. This is precisely the reason why the big picture [macro] is increasingly becoming an important cog in the scheme of investing. Today, merely looking at a stock from a price to earnings ratio (PE) perspective has become irrelevant.
Can you elaborate on the PE multiple losing its relevance?
When I joined Reliance MF in 2003 and, even before, balance sheet was very important and still continues to be so. The only difference at that point of time was that very few understood and tracked a balance sheet. But, today, it’s the norm. In that sense, investing has become much more competitiv