August 11, 2025
mayank
SahiFund.com had the opportunity of having an in-depth conversation with Mr. Mahesh Patil, CIO, Aditya Birla Sunlife AMC Ltd. on wide ranging topics.
- Track Record & Strategy
Your ABSL Large Cap Fund has consistently outperformed the BSE 100 index over the last 7 years. What has been the core strategy behind this consistent outperformance?
The investment strategy combines a top-down approach to identify and diversify across sectors, thereby minimizing concentration risk, with sector weightages allowed to vary by 30% relative to the benchmark or 5% absolute—whichever is higher. At the core of stock selection is a bottom-up methodology focused on established large-cap companies that generate strong free cash flows and maintain a ROCE of at least 15% over the business cycle, with individual stock exposure capped at 10%. This disciplined, fundamental research-driven process targets a consistent generation of recurring alpha in the range of 1-2%. Additionally, the fund prudently allocates up to 15% of its portfolio to opportunistic exposures in mid-cap and small-cap stocks, balancing growth potential with risk management. This cohesive strategy underpins the fund’s consistent outperformance over the long term.
| Scheme Name | 3 Years | 5 Years | 10 years | 15 years | ||||
| Returns | Quartile | Returns | Quartile | Returns | Quartile | Returns | Quartile | |
| Aditya Birla Sun Life Large Cap Fund | 20.5 | 2 | 22.17 | 1 | 12.63 | 2 | 13.26 | 1 |
| Category Average | 19.69 | — | 20.66 | — | 12.3 | — | 12.27 | — |
| Benchmark – Nifty 100 TRI | 19.2 | — | 21.4 | — | 13.32 | — | 12.62 | — |
| Alpha over Category Average | 0.81 | 1.51 | 0.33 | 0.99 | ||||
| Alpha over Benchmark | 1.3 | 0.77 | -0.69 | 0.64 | ||||
Data as of 30th June 2025. Regular Plan. All peers are considered in category average. Less than 1 year are absolute and more than 1-year annualised returns.
- The Fund Continues to outperform the benchmark across various time horizons.
- In the past 21 years the fund it has been in Q1/Q2 in 15 out of 21 years which shows long-term consistency and ability to bounce from brief periods of under-performance.
- Market Philosophy
How would you describe your investment philosophy when managing large-cap funds? Do you lean more towards growth, value, or a blend of both?
At Aditya Birla Sun Life AMC Ltd, the core of our investment philosophy lies in the principle of Sustainable Growth at a Reasonable Price (GARP). A diligent process is followed to select companies for our investment universe. The endeavour is to outperform the benchmark by a reasonable margin through a balanced approach that involves taking measured risks. There is a blend of growth & value but it tends to lean more towards growth at a reasonable price since wealth creation happens in companies that have a strong moat and have the tendency to grow faster than the industry and economy. It is important to not only assess the size of the opportunity but also study the business fundamentals, the quality of management and sound corporate governance practices. Our focus on growth prospects ensures that each investment aligns with sustainable value creation over the long term. We prioritize opportunities where the prevailing valuations offer a clear margin of safety, ensuring prices remain below their intrinsic fair value. Emphasis is placed on companies demonstrating consistent compounding of Return on Capital Employed over extended periods.
- Sector Allocation
Looking ahead, which sectors do you believe are best positioned to outperform over the next 3–5 years, given the evolving economic landscape in India and globally?
As India navigates its growth trajectory, certain long-term investment themes are emerging as front-runners in delivering sustained outperformance. The country’s digital transformation continues to accelerate, fuelled by increasing tech spending, cloud adoption, and AI integration. The financial services sector, particularly insurance and banking, remains resilient despite cyclical headwinds, with a renewed focus on non-lending spaces and attractive valuations. Healthcare and pharmaceuticals are also gaining traction, supported by a strong export pipeline and a robust outlook for complex generics. Simultaneously, infrastructure and industrials are poised to benefit from government-led Production Linked Incentives (PLIs) and increased budgetary allocation for large-scale projects. On the consumption side, sectors like retail, auto, and electronics are rebounding on the back of rising income levels, rural revival, and trends like electrification. These structural drivers are shaping the future of investment and redefining how portfolios are positioned for the long haul.
- Risk Management
In a market often driven by volatility and global uncertainties, what risk management frameworks do you employ to safeguard investor wealth while still seeking alpha?
Robust risk management forms the backbone of our investment approach, underpinned by a comprehensive governance framework designed to ensure continuous tracking and monitoring of risks through well-defined policies and procedures. Our multi-layered risk consciousness begins at the portfolio manager level, where active management focuses on controlling asset class exposure, portfolio concentration, liquidity risks, compliance, and corporate governance. Beyond managing risk, there is a deliberate emphasis on rewarding prudent risk-taking through succession planning, guiding the investment team, and maintaining strong governance at the fund house level via investment committee meetings, risk reviews, and internal audits. Holistically, the process incorporates rigorous portfolio risk assessments across asset classes, stress testing, adherence to statutory and internal limits, detailed portfolio analysis, and benchmarking against peers and indices. Also, there are guardrails for exposure at company level, sector level and stock level.
- Macroeconomic Triggers
How do you see interest rates, inflation, and geopolitical developments influencing large-cap investing in the medium term?
In the current macroeconomic landscape, marked by uncertainties stemming from global trade tensions and uneven recovery across markets, investor focus is increasingly shifting toward large, well-established companies with strong fundamentals and market leadership. These businesses are better positioned to navigate disruptions like tariff hikes or demand slowdowns. While broader economic growth has moderated and earnings visibility remains weak, large-cap companies offer relative stability having easier access to capital. However, with inflation trending down and interest rates expected to soften further, the macro environment is gradually turning supportive. This sets the stage for a potential revival in mid- and small-cap segments as well. While large caps may continue to anchor portfolios in the near term, a selective and staggered allocation to quality mid- and small-cap names could offer meaningful upside as growth rebounds and sentiment improves.
- Active vs Passive
With the rise of passive funds and ETFs, how do you justify the role of active fund management in large caps, and where do you believe active managers still hold a clear edge?
During periods of sideways markets and volatility, fund managers are tested on their ability to spot mispriced opportunities and generate alpha. One approach is tracking stocks that have surged 50-100% from their 52-week lows. Historically, India shows a higher number of such stocks compared to the US, indicating more opportunities. The US market’s efficiency limits the chances of uncovering mispriced assets, whereas India offers scope for sectoral bets and bottom-up stock picking. Since 2020, around 50% of Indian stocks have risen over 50% from their lows, versus just 33% in the US, highlighting India’s greater potential for outperformance.
Active management holds a distinct advantage in a growth market like India, where the market landscape is continuously evolving. As new companies emerge, and existing mid-cap firms grow to become large-cap, active managers have the flexibility to identify and invest in these rising stars early—well before they are officially included in benchmark indices. Passive strategies often lag in capturing these shifts, while active managers can pre-emptively build positions, potentially delivering better returns. This ability to stay ahead of index changes and tap into the next wave of market leaders underscores the value of active investing in such a rapidly expanding economy.
- Outlook for Investors
What is your five-year outlook for the Indian equity markets, particularly for long-term retail investors in large-cap funds?
The long-term outlook for the Indian equity market remains robust. India’s macroeconomic stability, supported by favourable demographics and consistent policy direction, provides a solid foundation for sustained GDP growth. Over the long run, India is expected to grow at a steady pace of around 6.5%, with the possibility of even higher growth if aided by supportive global conditions. This translates into nominal GDP growth in the range of 10–11%, factoring in inflation. Corporate earnings, historically aligned with nominal GDP trends, are expected to grow at a slightly faster pace—potentially in the 11–13% range—due to improving operational efficiencies and formalisation benefits. With large-cap equity valuations currently hovering near their long-term averages, investors can expect market returns to broadly reflect underlying earnings growth. In such an environment, well-managed large-cap mutual funds may deliver alpha of 1–2%, offering attractive long-term compounding opportunities for retail investors.
- Advice to Retail Investors
Finally, what would be your key advice to retail investors who are hesitant about entering the market now, given current valuations and global uncertainties?
For investors navigating through the current market volatility, the key is to stay committed to long-term investing and avoid the pitfalls of market timing. SIP remains the most effective strategy, offering a disciplined approach that helps smooth out market fluctuations. While short-term uncertainties—such as global trade tensions and intermittent corrections—may create hesitation, current market valuations are reasonable, and recent pullbacks present potential entry opportunities. Although further drawdowns cannot be ruled out, they are likely to be temporary, as India’s economic fundamentals remain strong. For investors still sitting on the sidelines, now may be a good time to begin building positions gradually. The strength of SIPs lies in their ability to help investors ride out volatility while compounding wealth steadily over time—a strategy particularly well-suited for investors seeking long-term wealth creation.