Long term reduction in interest rate differential between India and developed nations and the expected rise in earnings for the Sensex companies are two positives for the Indian market says Neelesh Surana, Senior Equity Fund Manager, Mirae Asset Mutual Fund in an email interview to Cafemutual
Given the volatility in the market, what kind of funds would you suggest distributors to recommend to their clients?
We would advise investments in the diversified equity funds. Such funds are sector and size agnostic. Hence they are better positioned because they have the flexibility to focus on businesses which could grow despite the headwinds of inflation, currency, interest rates, etc.
Would you advise routing investments via liquid to equity SIP or is there a better alternative? Or, would you recommend lump sum investments?
We continue to believe that SIP is a better alternative to participate in the market given the advantage of averaging as well as from an investment discipline viewpoint. However, for someone with limited allocation towards equity, an allocation of at least one-third would be recommended. Beyond that it would largely depend on the individuals’ asset allocation and cash flows.
Which SIPs (diversified, sector, mid-cap, etc) would you recommend at this juncture?
Generally it is advisable to have a portfolio comprising not more than six to seven funds wherein a larger chunk is skewed to the equity diversified funds segment. Given the variables impacting various businesses, it is prudent to opt for an equity diversified scheme.
Last year, the return from pharma funds was 34 per cent. Which sector could throw up a surprise this year?
A plethora of stock-specific opportunities are available across the sectors after the recent correction. Calendar year 2010 also had a huge divergence within stocks across all sectors except for the financial sector. We believe that a similar trend would continue in the current year. It is imperative to identify the right companies. On a sectoral basis, we are bullish on consumer-related sectors, commodities, and pharma.
What is the near term outlook for the markets?
There are various headwinds linked to inflation and high interest rates. Crucial in this will be crude oil prices. However, many of these negative are built-in in the current valuations. We are positive given [a] the current high differential of interest rates in India vs. other economies would reduce in the long-term; and [b] Despite the headwinds, the earnings for the Sensex companies in 2011-12 would grow.
