ETMarkets PMS Speak | We analyse over 300 knowledge factors to determine alpha: Wright PMS’ Sonam Srivastava
In an interplay with Kshitij Anand of ETMarkets, she stated the agency analyses greater than 300 knowledge factors—from valuations and earnings momentum to macroeconomic indicators and sectoral tendencies—to determine alpha-generating alternatives.
She additionally shared how Wright PMS dynamically adjusts its allocations throughout elements and sectors, with present preferences tilted in direction of knowledge centre-linked performs, energy transmission, choose pharma shares and domestic-facing themes. Edited Excerpts –
Kshitij Anand: Can you are taking us by way of the efficiency of the fund vis-à-vis the benchmark within the current interval?
Sonam Srivastava: See, we’ve got two funds: one is the Issue Fund and the opposite is the Alpha Fund. Our Issue Fund has had run. We are actually nearly three years since inception, and the fund has delivered near a 20% CAGR in comparison with round 11% by the market. So, it has carried out very effectively since inception.
During the last one yr, we’ve got been capable of beat the benchmark by round 10%. Even over six months, three months, and one month, we’re outperforming the benchmark. The explanation for that is our tactical, quantitative method. We have been capable of shift into the correct set of sectors.
We now have vital publicity to firms within the knowledge centre area, energy transmission, and many others., which our elements and fashions picked up. That’s the reason the efficiency has been robust.
Kshitij Anand: Are you able to clarify what issue investing means in easy phrases and why you consider it could possibly outperform conventional stock-picking methods?
Sonam Srivastava: See, issue investing is one thing that individuals have been doing for years. Issue investing basically means making an attempt to grasp the underlying forces available in the market that drive returns.
There are some very well-known elements, resembling valuation—something that’s undervalued tends to outperform; development—something that’s rising quick tends to draw traders; high quality—high-quality firms entice traders; and behavioural elements like momentum, the place shares that choose up a development have a tendency to draw traders.
What issue investing does is attempt to break down these metrics for every inventory. It’s a superb quantitative method to have a look at the market. Whereas 4 or 5 elements are extensively recognized, we attempt to dig deeper and determine what else we are able to have a look at.
We analyse greater than 300 knowledge factors. For instance, we could have elements that determine the impression of inflation, exhibiting which shares are prone to be affected by inflation and which aren’t, or which shares have publicity to North America or Africa, and so forth.
So, there generally is a very attention-grabbing set of things, and we consider it’s a very efficient method to achieve a holistic understanding of a inventory and the completely different forces influencing it. Via that, you may generate alpha. Lots of people affiliate issue investing with passive funds.
Whereas that method additionally has its personal worth, you can find that in a single state of affairs, a momentum fund generally is a nice funding alternative, whereas in one other, a top quality fund could also be extra enticing.
Nonetheless, our method is extra lively in nature—we actively consider elements, and we consider that may generate significant alpha over the long run.
Kshitij Anand: Allow us to have a look at this extra deeply now. The fund mentions dynamic asset allocation between fairness, elements, bonds, and gold. So, what indicators decide these allocation shifts, and the way continuously do they happen?
Sonam Srivastava: See, once more, it’s a very attention-grabbing query. There are two components to it. To begin with, getting the correct set of things. As I stated, we aren’t constrained to solely 5 elements or 10 elements.
We’re something and all the pieces that’s attention-grabbing. And even in case you are valuation, it doesn’t need to be the PE ratio. It may be some other metric that makes extra sense. So, that’s the first half.
Second, we have a look at one thing known as a market regime. Is it a development market, a consolidating market, or a market the place there may be capitulation and issues are falling sharply?
What you will notice is that all through the market cycle, sure units of things work effectively in several phases. For instance, high quality works effectively when the market is falling. Secondly, as soon as development begins from the underside, you will notice worth shares doing effectively. And when development actually picks up, momentum shares are inclined to do extraordinarily effectively.
So, we attempt to mannequin that market regime utilizing macroeconomic indicators. Once more, we do all the pieces quantitatively. We have a look at metrics resembling liquidity available in the market, sentiment, and valuations, and many others., to determine which regime we’re in.
As soon as we all know the regime, based mostly on that we modulate the quantity of danger we’re going to take. If we’re taking much less danger, high quality mechanically will get extra weight. And if we’re taking extra danger, momentum mechanically will get extra weight.
Kshitij Anand: Good that you simply talked about the quantitative and qualitative facets. So, how do your quantitative fashions adapt during times of utmost market volatility, resembling geopolitical occasions or the sudden financial shocks that we’ve got seen not too long ago?
Sonam Srivastava: See, I believe that could be a very, very apt query for right now’s time, and we’ve got seen this all through the cycle. I provides you with some context right here. We began the PMS three years in the past.
The primary one-and-a-half years after beginning have been most likely the most effective interval. It was like the height, and I believe we have been among the many top-performing funds. We did extraordinarily effectively.
Then, when volatility hit final yr, it did have an effect as a result of in 2025, nearly something and all the pieces obtained affected. So, there have been classes as effectively.
What occurs throughout unstable durations is that our technique begins allocating extra in direction of lower-risk elements resembling high quality and adopts a extra defensive stance. All through 2025, we noticed that the allocation was comparatively extra defensive.
Ultimately, we began including extra publicity to sectors resembling cement and chemical compounds, and in direction of the tip of final yr, we considerably elevated our allocation to industrials. So, the portfolio adapts with the market. However sure, the fashions positively deal with such conditions very well.
Kshitij Anand: Now, with the portfolio turnover of round 250%, how do you stability lively administration with transaction prices and tax effectivity?
Sonam Srivastava: That can be an excellent query. See, in the event you have a look at any lively supervisor, they have an inclination to have a good turnover. Many lively managers, even within the conventional area, have turnover north of 150% or so.
Some worth investing funds, alternatively, sometimes have very low turnover as a result of they purchase a inventory and maintain it for a very long time earlier than promoting it.
After we are working with knowledge, what occurs is that if we merely let the information run, it adjustments daily, which may result in very excessive churn. In actual fact, 250% is definitely fairly low. So, what we do is implement turnover controls.
We attempt to strike a stability between the quantity of returns we are able to generate and the extent of churn we are able to afford. We purpose to seek out that candy spot, and we consider 250% is a really cheap determine.
If you happen to have a look at another quant funds, I’ve heard of managers reporting turnover of 600%. So, ours is a good quantity, and we expect it’s justified. For instance, final yr we noticed a whole lot of churn from defensive sectors into industrials, which was utterly justified as a result of that’s what has been working available in the market.
Kshitij Anand: Earlier within the dialog, we spoke about elements. Are there any particular elements, resembling momentum, worth, high quality, or low volatility, that presently dominate your allocation, or does the mannequin resolve that dynamically?
Sonam Srivastava: As I used to be telling you, I not too long ago wrote a e-newsletter about this. We carried out an in depth evaluation of the macroeconomic surroundings, and the image is combined. Clearly, we’re seeing some restoration in sentiment with the Iran deal coming in, and there could possibly be some euphoria going ahead.
Nonetheless, in the event you have a look at issue tendencies and dispersion—which implies the distinction between the top-performing momentum shares and the least-performing momentum shares—you can find that value momentum, earnings momentum, the place we monitor the expansion projections of shares and the way they’re evolving, and worth are the elements which might be working very well proper now.
However, low volatility and high quality are presently underperforming for some cause. We’re additionally seeing that plain beta will not be working as a result of there are such a lot of forces at play. You’ve gotten developments associated to Iran, home elements like El Niño, and broader home market churn.
So, merely counting on beta is not going to work. It’s important to be very strategic, and that’s the place these elements have helped us determine the correct set of shares.
Kshitij Anand: Given the present market valuations, the place do you see the most effective alternatives for factor-based investing over the following, allow us to say, 12 to 18 months?
Sonam Srivastava: As you talked about, we’re presently recovering from a weak market part. Sometimes, throughout such recoveries, you will notice momentum and earnings momentum ship stronger returns.
When it comes to market segments, what we’ve got noticed inside our personal methods is a big allocation in direction of shares with publicity to the information centre theme. For instance, we maintain one inventory, MTR Applied sciences, which has gone up almost 3 times in our portfolio in 2026.
We even have publicity to a number of firms within the energy transmission phase which might be benefiting from the information centre alternative, they usually have been performing very effectively.
Extra not too long ago, I’ve additionally began seeing pharma names emerge in our fashions, together with a number of client shares.
Kshitij Anand: Does factor-based investing work higher in a bull market, a bear market, or a sideways market?
Sonam Srivastava: See, factor-based investing is simply an umbrella time period. It may imply many alternative issues. There generally is a quant investor or a factor-based investor who focuses solely on high quality.
There generally is a issue investor who focuses solely on momentum. We all know there are some individuals who solely do momentum, some who solely do high quality, and others who solely concentrate on development.
So, there’s a complete spectrum of approaches. And due to that, you’ll have managers who outperform in several market situations.
If any individual has a quantitative focus solely on high quality, they’ll do effectively in unstable markets. Any individual with a quantitative concentrate on momentum will do effectively in a bull market however could battle when the market turns into unstable.
So, it’s a broad time period. We did have publicity to momentum in 2025, which is why we noticed a correction, after which we regularly shifted in direction of high quality. Now, momentum has began choosing up once more.
The explanation I began Wright Analysis is as a result of I consider that if I could make the proper tactical allocation by way of these elements, then I can determine the correct technique for each market.
It is rather troublesome to do since you not solely need to concentrate on issue methods but additionally determine the kind of market you might be in. It may be tough, however that’s our method. If we are able to try this appropriately, then we are able to clearly generate increased alpha. So, I consider issue investing has that potential.
Kshitij Anand: Are there any sectors which might be trying enticing to you at this time limit?
Sonam Srivastava: Sectorally, we’re at an attention-grabbing stage. We now have seen run-up within the themes I used to be speaking about earlier, resembling proxy AI performs like knowledge centres. We now have witnessed a really robust bull run there, and we’re nonetheless allotted to that theme.
We additionally had publicity to metals, though we’ve got decreased it barely in current instances. On the patron facet, we’ve got picked up a number of names, in addition to some pharmaceutical shares, the place we’re seeing a whole lot of stability and development.
Within the client area, we choose particular names relatively than your entire basket as a result of elements just like the monsoon may have an effect. Nonetheless, sure firms are positively doing effectively.
We wouldn’t have any publicity to IT in the intervening time. In banking, we’ve got publicity to some NBFCs, and we consider there may be some optimistic information movement on the NBFC facet as effectively. Broadly, that’s the form of publicity we presently have.
Kshitij Anand: So, extra domestically oriented sectors, really.
Sonam Srivastava: Sure, there’s a robust home orientation. I will even share the e-newsletter with you. We analysed what labored and what didn’t work during the last yr.
We discovered that firms with publicity to the US greenback or the US market itself haven’t carried out notably effectively. Nonetheless, firms with publicity to Europe, the Center East, and Africa have delivered higher efficiency throughout the identical interval.
(Disclaimer: Suggestions, ideas, views, and opinions given by consultants are their very own. These don’t symbolize the views of the Financial Instances)
