Domestic fund managers who have shunned the markets for the best part of the past six months are slowly beginning to find the market attractive. With the quarterly earnings season promising to be better than the past two, though a majority still find the market trading above fair valuation, most of them are using the correction to shop for their favourite stocks, many of which look less expensive.
A DNA poll found that 70% of the top fund managers feel the market is trading above its fair valuation; 10% feel it is trading below fair valuation; and 20% see opportunities to invest even at present levels.
Around 70% of the managers are either fully invested or have begun deploying cash, while the rest say they would start deploying cash if the market corrects a bit more.
"There was a lot of hype over the budget expectations, which has now cooled off. The valuations are attractive although the levels are still above the fair value range," said the equity head of a large fund house, which came with an NFO recently.
He said the fund house is continuously deploying cash (buying stocks) at these levels.
The survey polled managers from top fund houses, including Reliance MF, DSP Blackrock, SBI MF and Birla Sun Life MF, who between them control over 40% of the equity assets managed by MFs in the country.
It marks a significant change in the mood of the fund managers. The change is banking on the increasing optimism that the corporates are heading back to positive growth after two bad quarters."The earnings will be better than last two quarters, though year on year it would be flattish-to-marginally negative. Metals and real estate will create delta on the negative side, while banking will give a positive swing," Anup Maheshwari, head of equity and corporate strategy, DSP Blackrock MF said.
Also, from a valuation perspective, things have begun to look attractive for the funds, after the post-Budget correction in the market. Yet another aam admi-friendly Budget has dampened sentiments of short-term foreign investors, who are looking to book profits.
On Wednesday, foreign funds sold equities worth Rs 828 crore. Gopal Agarwal, head equity, Mirae Asset, said, "FII interest has come down to some extent post Budget." He was quick to add that the days of risk aversion are largely over.
Agarwal feels global cues will continue to dictate market direction going forward.
The president of a large foreign mutual fund, who did not want to be quoted, agrees that global market movements will be important. "Markets will be influenced by what is happening in global markets. The Budget was good. There is no reason to be disappointed with it. Today's market reaction is largely influenced by the global cues. We are reasonably deployed in the market. We are buying on dips," he said.
On Wednesday alone, the local funds net-bought shares worth Rs 594 crore. This was on top of Rs 196 crore they bought on Tuesday.
Domestic institutions have been sitting on huge cash positions and have bought a meagre Rs 1,825 crore between January 1 and July 7 this year. This is less than even the amount garnered by a single NFO recently.
On the contrary, the foreign institutional investors have been shopping non-stop over the past four months. Since March, they have picked up Indian shares worth over Rs 34,000 crore. May alone saw foreign money in excess of Rs 20,000 crore come in after expectations soared with the election results.
Maheshwari of Blackrock said, "At this point, market seems to be fairly priced at around 15 times. It is close to the long-term average PE. Earnings scene at this stage is a bit of tail wagging the dog. If the market remains stable, there will be opportunity for companies to raise capital. This will in turn help improve their earnings over the subsequent quarters, which could further improve valuation."On the other hand, earnings could get affected if the market remains weak, he added.
In such a scenario, most managers are not seeing a major upside before the end of this fiscal. The most optimistic yearend target in the poll was 17000 on the Sensex, which means a 25% upside; the worst was 12000, a downside of 11%.
Most managers see markets ending higher if the global cues are favourable.
Agarwal of Mirae said, "If US is good, we might see Sensex going to 17000; if US is bad, we might trade in the 13000-14000 band."
A DNA poll found that 70% of the top fund managers feel the market is trading above its fair valuation; 10% feel it is trading below fair valuation; and 20% see opportunities to invest even at present levels.
Around 70% of the managers are either fully invested or have begun deploying cash, while the rest say they would start deploying cash if the market corrects a bit more.
"There was a lot of hype over the budget expectations, which has now cooled off. The valuations are attractive although the levels are still above the fair value range," said the equity head of a large fund house, which came with an NFO recently.
He said the fund house is continuously deploying cash (buying stocks) at these levels.
The survey polled managers from top fund houses, including Reliance MF, DSP Blackrock, SBI MF and Birla Sun Life MF, who between them control over 40% of the equity assets managed by MFs in the country.
It marks a significant change in the mood of the fund managers. The change is banking on the increasing optimism that the corporates are heading back to positive growth after two bad quarters."The earnings will be better than last two quarters, though year on year it would be flattish-to-marginally negative. Metals and real estate will create delta on the negative side, while banking will give a positive swing," Anup Maheshwari, head of equity and corporate strategy, DSP Blackrock MF said.
Also, from a valuation perspective, things have begun to look attractive for the funds, after the post-Budget correction in the market. Yet another aam admi-friendly Budget has dampened sentiments of short-term foreign investors, who are looking to book profits.
On Wednesday, foreign funds sold equities worth Rs 828 crore. Gopal Agarwal, head equity, Mirae Asset, said, "FII interest has come down to some extent post Budget." He was quick to add that the days of risk aversion are largely over.
Agarwal feels global cues will continue to dictate market direction going forward.
The president of a large foreign mutual fund, who did not want to be quoted, agrees that global market movements will be important. "Markets will be influenced by what is happening in global markets. The Budget was good. There is no reason to be disappointed with it. Today's market reaction is largely influenced by the global cues. We are reasonably deployed in the market. We are buying on dips," he said.
On Wednesday alone, the local funds net-bought shares worth Rs 594 crore. This was on top of Rs 196 crore they bought on Tuesday.
Domestic institutions have been sitting on huge cash positions and have bought a meagre Rs 1,825 crore between January 1 and July 7 this year. This is less than even the amount garnered by a single NFO recently.
On the contrary, the foreign institutional investors have been shopping non-stop over the past four months. Since March, they have picked up Indian shares worth over Rs 34,000 crore. May alone saw foreign money in excess of Rs 20,000 crore come in after expectations soared with the election results.
Maheshwari of Blackrock said, "At this point, market seems to be fairly priced at around 15 times. It is close to the long-term average PE. Earnings scene at this stage is a bit of tail wagging the dog. If the market remains stable, there will be opportunity for companies to raise capital. This will in turn help improve their earnings over the subsequent quarters, which could further improve valuation."On the other hand, earnings could get affected if the market remains weak, he added.
In such a scenario, most managers are not seeing a major upside before the end of this fiscal. The most optimistic yearend target in the poll was 17000 on the Sensex, which means a 25% upside; the worst was 12000, a downside of 11%.
Most managers see markets ending higher if the global cues are favourable.
Agarwal of Mirae said, "If US is good, we might see Sensex going to 17000; if US is bad, we might trade in the 13000-14000 band."
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