Neutral on IT stocks: Rajat Jain, Principal Mutual Fund

In a chat with ET Now, Rajat Jain, CIO, Principal Mutual Fund, shares his views about IT stocks.

Is it too early to buy IT stocks, they have corrected on an average by about 15% plus but large cap IT stocks are still expensive, TCS is trading at a PE multiple of 17 times, Infosys 14-15 times, HCL Technologies still about 13 times?

The markets kind of extrapolating what is happening on the US and European markets and the sense is that as economy slow, probably IT spends take a knock and that flow slows to Indian companies. Markets kind of taking that extrapolation but we have also seen that their margins are generally compressing in the past so at some valuation they will be interesting but we are in our portfolio have neutral bit on IT stocks.

Source: http://economictimes.indiatimes.com/markets/stocks/views/recommendations/neutral-on-it-stocks-rajat-jain-principal-mutual-fund/articleshow/9550838.cms

Goods, construction space may be re-rated: Rajat Jain, Principal Mutual Fund

In a chat with ET Now, Rajat Jain, CIO, Principal Mutual Fund, shares his views about FMCG and pharma space.

Indian market has two ends; one end which is the FMCG/pharma and the consumption space which is trading at a multiyear high. The other end is infra, real estate and machinery stocks which are trading at a multiyear low. Which part of Indian market will get re-rated or de-rated?

The thing which is already high as you pointed out, FMCG and pharma potentially well they can only at some point of time de-rated if the kind of growth expectations that the market builds in do not come through. Gradually if you see cap expenditure comes back in, their work in construction space which kind of reasonable if people make reasonable margins again. The capital good/construction companies can get re-rated but market will slightly take some time before it re-rates, it would not rate them in a hurry. If they see companies making margins, funds again and see capex orders coming in that will happen but it will take some time.

Source: http://economictimes.indiatimes.com/markets/stocks/views/recommendations/goods-construction-space-may-be-re-rated-rajat-jain-principal-mutual-fund/articleshow/9551028.cms

Prashant Jain on why this is a good time to buy stocks

A contrarian voice amid fervent calls for a cautious approach to equity investment at this point.

Here is what the reclusive, but highly rated Prashant Jain has to say on the ongoing turmoil in the market. In a note to his unitholders, the 43-year old executive director and chief investment officer of HDFC Mutual Fund says this is a good opportunity to "press the pedal on equity investments" (he is not saying whether by directly buying shares or through mutual funds!!!)

Jain, an ardent believer in the power of compounding, says there is little chance of going wrong while buying equities at a Sensex (forward) price to earning ratio of between 10 and 13.

Citing instances in the past, Jain says if you had bought the Sensex in September 2001 just after the 9/11 attacks, (when the index was available at a forward PE of 11) you would have made 84% over the next three years and 316% in five years.

And if you were bold enough to buy the Sensex during the collapse of the US housing market in June 2006 when the Sensex was going for a forward PE of 13, you would have made 61% in three years and doubled your money in five years.

Like Sachin Tendulkar makes batting look easy, Jain wants us to believe that there is no rocket science to investing.

"Good returns materialize over time on investments made at cheap valuations (meaning low PEs) and PEs are more likely to be low when the news flow is adverse. Simple, isn’t it! To be successful in investing, one should focus more on value and less on news flow."

Jain says the market is not yet factoring the benefits to the Indian economy from a downtrend in crude oil prices. Here is how he puts it:

"Sau sunar ki, ek luhar ki. This is a popular Hindi saying which means - 100 hits by the goldsmith have the same impact as 1 blow by the ironsmith. The not so appealing news items mentioned above miss one important happening and that is falling crude prices. Falling crude prices is the blow of the ironsmith, the positive impact of which is more than the negative impact of the rest."

Source: http://www.moneycontrol.com/news/market-outlook/prashant-jainwhy-this-isgood-time-to-buy-stocks_574965.html

Assets with MFs leap 8.17% in July

The mutual fund industry's assets surged by 8.17 per cent to Rs 7.28 lakh crore in July. The total assets under management of the mutual fund industry stood at Rs 6.73 lakh crore as on June 2011.

The rise in assets was led mainly by a sharp increase of 26.5 per cent in the liquid/money market funds. The assets under management for these funds stood at Rs 1.8 lakh crore, up from Rs 1.42 lakh crore in June.

“As equity markets are performing badly, the liquid schemes have become more attractive because of the high yields. A lot of money has found its way into these schemes,” said Mr Deepak Chatterjee, Managing Director, SBI Mutual Fund.

This increase is in spite of the RBI guidelines issued in April of this year asking banks to reduce their exposure to mutual funds.

After implementation of the guideline, the industry AUM was expected to have reduced by around Rs 40,000 -50,000 crore, fund analysts had said.

However, with the deadline for the withdrawal of these funds being extended from October 2011 to December 2011, the decline in AUM is expected to be gradual and smooth.

However, fund analysts are quick to point out that not all fund houses will be affected by this regulation. Only those fund houses which have a higher exposure to banks' money will be affected, while others may still have headroom for more of these funds, they said.

The equity schemes continued to witness a decline, with the AUM under these schemes coming down by 1.18 per cent. The equity AUM has declined from Rs 1.68 lakh crore to Rs 1.66 lakh crore in the last one month period. But fund managers and distributors say that the drop is mostly due to reduction in asset value. “We are not seeing redemptions at this point. Inflows are trickling in, though not in significant amounts. So, the drop is mostly due to asset value drop,” said Mr Gopal Agrawal, Chief Investment Officer & Head-Equity, Mirae Asset Global Investments (India).

Exchange-traded funds, excluding gold ETFs, were the second best performing fund category for the month of July, with an increase of 16.3 per cent in their AUM. Gold ETFs saw an almost 10 per cent growth in AUM.

Source: http://www.thehindubusinessline.com/markets/stock-markets/article2340466.ece