360 ONE Multicap PMS: Long Term Capital Appreciation in Volatile Markets

Current Market Context

Equity markets have been very volatile since October 2024 and continued to make lower bottoms in February 2025, with Nifty closing the month just a little higher than its 52-week low. The market continued to be negative throughout since October last year owing to multiple factors viz. weak global cues, high US Treasury Bond yields, strong US Dollar, China's outperformance, weak Q2 corporate earnings, Trump 2.0 Tariff rates etc. Nifty was down nearly 6%, closing just above the 22,000 level. The broader market saw deeper cuts, particularly in the small cap segment. in the last 2 months, the midcaps have corrected by 14.4%, while small caps have entered the bear market zone after falling more than 20%. (as on 28^th February 2025). Historical data shows that big corrections create attractive investment opportunities for long term investors. In this article we will discuss the wealth creation potential of 360 ONE Multicap PMS, which has a fantastic track record of outperforming the market.

Why Multicap strategy?

• Historical data shows that winners rotate across different market cap segments - see the chart below. In periods of market volatility, large caps outperform mid and small caps. Midcaps and small caps outperform in early to mid-stages of economic recovery. Flexible and prudent allocations to market cap segments can improve portfolio stability and a create alphas.
  
  

  

  Source: NSE, Advisorkhoj. As on 31^st December 2024



• During periods of higher volatility, large cap stocks have outperformed mid and small cap stocks. On the other hand, midcaps and small caps have higher growth and wealth creation potential compared to large caps. A Multicap portfolio can balance risk and return, for long term wealth creation.
  
  

  

  Source: Bloomberg. Data as on 28^th Feb 2025; Periodic returns mentioned above are absolute returns



• Each market cap segment has unique industries, making Multicap funds one of the potentially most efficient ways to aim for diversification of a portfolio. Certain sectors have market leaders beyond large caps. Exposure to market leaders might require diversification across market caps. Multicap is an effective strategy to capture the diverse opportunity set in the India Growth Story

Why invest in PMS now?

• PMS fund managers have greater flexibility: Portfolio Management Services are specialized investment vehicles suited for investment needs of High-Net-worth Investors (HNIs). PMS Managers have much greater flexibility than mutual fund managers because they are not bound by some of the restrictions which mutual fund managers have. For example, PMS Managers have greater ability to time the market by taking cash calls, which mutual fund managers may be unable to take. As such, PMS may be better suited for investment needs of experienced investors who desire higher alphas (outperformance versus market benchmark).


• GDP growth potential by 2033: S&P Global recently updated their GDP growth forecast for India to 6.5% for FY2025-26. As per the IMF projections given in its World Economic Outlook database for September 2024, India will overtake Japan to become the third largest economy by 2033.
  
  

  

  Source: IMF World Economic Outlook - October 2023. India's GDP is estimated for FY24. GDP values for other nations are estimates for CY2023. For 2033 numbers - CEBR World Economic League Table 2024



• India 5^th largest economy by market capitalization: India is currently the 5^th largest economy by market capitalization, which provides myriads of investment opportunities to the long term investor to take part in the India growth story.
  
  

  

  Source: 360 ONE AMC as of Feb 28, 2025. Past performance may or may not be sustained in future



• Consumer lending opportunity: Currently only 10% of India's population accounts for 70% of India's USD 650 billion consumer lending market. There is huge scope of consumer lending growth as the sections in the lower income groups are brought under the ambit of retail credit.
  
  

  

  Source: 360 ONE AMC



• IT sector opportunity: Over the past 2 - 3 decades India has emerged as one of the leading software sourcing hubs of the world. India's software exports accounts for 11% of global software market (source: Ministry of External Affairs, April 2023). For every job that is created in the IT sector, four jobs are created in the rest of the economy (NASSCOM-Crisil report). Commercial real estate benefits due to an IT boom as the IT sector covers close to 50% of the annual commercial real estate supply. The knock-on effects of IT sector growth in India will be very beneficial for Indian economy and corporate sector. By 2030, the IT sector is expected to constitute 10% of the GDP of India. (source: 360 ONE)


• PLI schemes boosting Private sector investments: The production linked incentive scheme (PLI) of the Government is incentivizing private sector capex spending. Total expected capex is Rs 3 trillion, out of which Rs 1.3 trillion. This can translate into incremental production of Rs 40 trillion and direct / indirect employment of 6 million. Production Linked Incentive (PLI) Schemes for 14 key sectors were announced with an outlay of Rs 1.97 trillion to boost India's manufacturing capabilities.
  
  

  

  Source: 360 ONE AMC



• Valuations have corrected: Valuations have corrected and become attractive for long term investors. The Sensex Price to Book at 3.9X (as on 28^th February 2025) is slightly more than 1 standard deviation of the 23-year average P/B of 3.2. As on 24^th March 2025, the price to book value of the Sensex was 4.01, which is very close to 1 standard deviation from the mean. Based on historical data, the market is in the 3X to 4X+ P/B range in 41% of the instances. The market may be in the P/B range of 3 and 4 for a considerable period of time and can give strong 5 years returns from the current valuation levels.
  
  

  

  Source: Bloomberg, as on 28^th February 2025



• Improving trend of fundamentals: Fundamentals are on the improving trend: Corporate profits to GDP ratio has been improving from its low in 2020 (COVID-19) after a long period (more than 10 years) of decline. Historical data suggests that improving corporate profits to GDP ratio indicates long term secular bull market for Indian equities.
  
  

  

  Source: Motilal Oswal, corporate profits refer to earnings of Nifty 500 companies



• Compounding potential of Indian equities: In last 20 years, 75 stocks in BSE 500 gave more than 20% CAGR returns. In last 10 years, 20% of BSE 500 stocks gave more than 20% CAGR returns. The 20% CAGR hit rate of Indian stocks is much higher than developed markets like US, Japan etc and emerging markets like China.
  
  

  

  Source: Bloomberg. Data as on 31^st December, 2024

Wealth Creation with 360 ONE Multicap PMS

The objective of the 360 ONE Multicap PMS investment approach is to generate long term capital appreciation for investors from a portfolio of equity and equity related securities. Under the able management of fund managers Mr. Anup Maheshwari and Mr. Nishant Vass assisted by the Co-fund manager Ms. Simran Suryawanshi, the 360 ONE Multicap PMS has delivered 20.81% returns since its inception in December 2014. The benchmark BSE 500 TRI returns during this time was 14.79%. (as on 28^th February 2025)

Source: 360 ONE AMC

Investment Strategy

The investment strategy of the fund is to invest in a portfolio following the SCDV framework (Secular, Cyclical, Defensives, Value Trap) wherein it invests a large proportion of the portfolio in high quality Secular growth companies which are long term compounding stories. Rest of the portfolio is invested across quality Cyclicals and Defensives while avoiding Value traps. Portfolio construction across these three quadrants enables to enhance diversification even with limited number of stocks. To elaborate, the 4 features in the investment strategy are:

1. Core Portfolio- Secular: - Companies which are consistently growing PAT by more than 15% and delivering ROE of more than 15% over long periods of time


2. Tactical allocation- Cyclical: - Companies which tend to have high capital expenditure leading to higher sensitivity in ROE and PAT growth to economic cycles. ROE tend to be lower than 15% over long term but PAT undergoes cycles of high growth


3. Tactical allocation- Defensives: - Companies which have been delivering ROE of more than 15% but PAT growth of less than 15% over long term. These are less vulnerable to economic cycle and provide good cushion during volatile times.


4. Underweight allocation- Value Traps: - Companies which have struggled to generate 15% PAT growth and 15% ROE over the long-term period. An underweight stance with limited exposure is maintained for these companies in case changing regulations/management/competitive landscape resulting in non-linear value creation in these companies is noticed.
   
   

   

   Source: 360 ONE AMC as on 28^th Feb 2025

Top Sectors and Holdings

Source: 360 ONE AMC as on 28^th Feb 2025

High active share

360 ONE Multicap PMS has higher allocations to secular and cyclical stocks relative to the benchmark (BSE 500). The portfolio has higher small cap allocation compared to the benchmark.

Source: 360 ONE AMC as on 28^th Feb 2025

High quality portfolio with reasonable valuation

Source: 360 ONE AMC as on 28^th Feb 2025

Our take

• Though the RBI MPC cut repo rates by 25 bps in February 2025, there in uncertainty due to high US Treasury Bonds and strengthening dollar.


• FIIs net sales of more than Rs 35,000 crores and the resultant market fall has made stock selection in the current market context and economic outlook for 2025, a significant driver in portfolio returns.


• The long-term outlook for Indian economy remains strong. According to S&P Global Market intelligence projections, India's nominal GDP will double to US$ 7 Trillion by FY 2030-31. India's macro-economic stability and growth potential will attract investment flows. Indian equities are positioned to enter into a new bull phase, once the short-term correction is over.


• 360 ONE Multicap PMS with its track record of alpha creation is strongly positioned to deliver alphas for investors in the medium to long term.

Consult with your financial advisor or PMS distributor if you want to know more about 360 ONE Multicap PMS