A measured approach to investing has been the key to Ajay Argal's success in the markets.

Investing in the markets is all about temperament. This is amply reflected in the conservative, stick-to-the-basics attitude that Ajay Argal personifies. He puts it down to his value-based middle class upbringing that frowns upon adventurism, and the decade long stint at UTI where he learnt what the bulls and bears were all about.

It is this phase of his career that taught him the value of patience and the need to keep his composure when the markets go ballistic. So how does he react to market volatility?

"I don't get swayed by day-to-day market movements. I keep calm as I know that fundamentals will only get reflected over the long-term," says the 38-year old senior fund manager of Birla Sun Life Mutual Fund.

A votary of growth investing, Argal borrows heavily from the investing philosophy of masters such as Warren Buffet and Peter Lynch. But he is aware of the need for an India-specific investment strategy. "Some of their investment styles are more suited to mature markets while India is a growth story," he says.

From theory to practice

In a volatile market, his investment strategy has helped deliver decent returns for the two Birla funds he has been managing since January 2006.

For the six months since January to June, the Birla Top 100 Fund, which is a large cap fund and aims to invest at least 65 per cent of its assets in top 100 companies by market capitalisation, has delivered about 8.9 per cent whereas its benchmark S&P CNX Nifty delivered about 10.3 per cent.

For the same period, Birla Advantage Fund, whose portfolio is a mix of large and mid cap stocks, has been disappointing as it has delivered 3.2 per cent returns whereas its benchmark Sensex delivered 12.9 per cent during the same period.

At UTI, the India IT Fund that he was managing was ranked the top performing fund among all technology funds worldwide in 2004 by Standard & Poors. It was on the back of a consistent performance of the India IT Fund that UTI decided to launch another sectoral fund, the India Pharma Fund in March 2005.

In addition to these, he managed the India Fund and a seven year close-ended fund called the India Infrastructure Fund. In the India Fund, Argal had invested in sugar stocks like Balrampur Chini [Get Quote] and Bajaj Hindustan [Get Quote] in 2004.

He made good profits due to the favourable demand-supply scenario in the sugar sector. In 2005, sugar was in short supply due to a bad monsoon and this led to increase in sugar prices which boosted the earnings of sugar companies.

Stock picking-the Birla way

Birla Mutual follows an 'investment universe' concept. Managers pick stocks based on three criteria-management quality, business of the company and the price at which the stock is available. If stocks pass all the three tests it is put into the investment universe.

Then, depending upon each fund's objective, they place the appropriate stock in that fund. The three broad criteria given above are analysed in detail. Management quality is ascertained by looking at the company's track record, corporate governance history and whether the company has managed to deliver what they promised.

Meeting the management regularly is also important. "I would not invest in a company if I am not certain about management intentions," says Argal who defines himself as a sober person who has a measured, logical approach for everything.

The second criteria is to analyse a company business-the kind of business, its profitability, and whether it has any competitive advantage. The last step is to ensure that the stock is liquid and whether it is available at the right price.

"Liquidity is important from the point of view of entering and exiting," explains Argal. Argal believes that equity investing is all about comparing the upside with the downside possibilities. The more favourable the ratio, the better is the stock.

Making money

Is there a formula that has helped Argal pick stars for his funds and deliver consistently good performance over the years? "It's only hard work and there is no magic formula," says Argal.

He lays a lot of emphasis on research, which he feels is important for achieving above average returns. Describing his experience at both UTI and Birla, he says, "The primary strength at both places is the research team. The only difference at Birla is that decision making is much faster due to its smaller size."

He believes in bottom up stock picking and mainly follows the growth style of investing. As he says, "One should concentrate more on growth stocks in a growing economy and value stocks in a mature economy."

Individual investors should be patient and look at stock investments over the long-term. "Investors looking for quick returns are the ones who would be disappointed," he says.

Career and other interests

While he did not have a defined career path before he chose to be an investment specialist, Argal knew that his strength lay in numbers. After graduating as an aeronautical engineer from IIT, Bombay, Argal chose IIM, Bangalore to pursue his interest in stocks and investments.

But how do aeronautics and stocks match? "There weren't many options in aeronautics in India and I was not willing to leave the country," he says. An avid reader, Argal's interests range from philosophy to finance.

While books are a good teacher, there is no substitute to experience, says Argal. He should know for he has donned the hats of an equity dealer, researcher and manager of a basket of funds over his 13 year investment career.

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