Friday, June 8, 2012

Bullish on rural consumption story: Aviral Gupta, Indiabulls Mutual Fund

In an interview with ET Now, Aviral Gupta, Fund Manager-Equity, Indiabulls Mutual Fund, gives his views on the Indian economy and key sectors. Excerpts:

ET Now: This week alone we have seen something like a 4% run up in the Indian equity markets. There was some weakness today, but would you say broadly the direction is up from here on?
Aviral Gupta: We will break this into three parts what is exactly going on in the world economy. I will touch on Europe, the US, China and then India. We have had QEs, we have had LTROs, but has anything really worked? We really do not know what is going to work over there. Now coming to China, China is trying to shift from an export-oriented economy to a domestic economy. It is not going to happen in a day's time or a year's time or two years' time or even five years' time. Coming to emerging markets, coming to Brazil, growth rate has come down to 2.1%. Now where does India stand in all this? We are at very great advantage right now compared to other economies. That is the kind of view which I am taking in. Now how do we take advantages? Only if the government comes up with some reforms, some policies.

ET Now: What is the portfolio approach that you are adopting and do you think that someone who is sitting on cash now start putting their money into the markets? Are these attractive or compelling valuations according to you?
Aviral Gupta: Valuations are very compelling at this point of time. No doubt about it, but I would say you might get the stocks much cheaper from these levels. Let us see how Greece pans out and that will be the key deciding factor. Second thing is the markets globally have run up, but I do not think there would be that much of upside this time in case QE3 is announced. All those things have completely failed. So why would I trust another QE?

ET Now: Everyone has agreed that you will have a fractured mandate come out of Greece and there will be some development in Greece even if they do not leave the Euro. By the end of July Spain is going to default in some manner or the other because it has got to bail out its territories, it will have to seek an international bailout. Now given these two significant developments, do you believe that the markets or rather central banks will have to push ahead with some form of QE and that in turn can drive up equities and EMs irrespective of what is happening in Europe?
Aviral Gupta: That will definitely drive the equities and the EMs, but that turn will be a very short-term run. That is what I feel. If we want our markets to be sustainably on a bullish mode, the government has to come out with certain reforms, that would be the key. Because, as I said earlier, all the actions which have been taken in the past have failed completely. So what else can they bring now? Which tools are left there, that is a very big question mark.

ET Now: Let us break it down. If we look stock specifically or sector specific, which sectors would you start nibbling into which look attractive?

Aviral Gupta: We are still very bullish on rural consumption story simply because elections are due in the next two years. They may happen earlier also. In that case rural economy will be again flushed with money. They will push in money to the rural economy. So that is one sector which I am looking into. Secondly, some defensives like pharma are something which I am looking into, given the account specifically in lieu of rupee depreciation. I am very stock specific in IT. I cannot name the stocks specifically because of regulations, but a lot of bellwether have completely disappointed.

ET Now: How about the infrastructure sector, are you positive on that given some noise that came out of Delhi just two days back?
Aviral Gupta: Announcement, implementation and completion. They have to be cleared; more clarity is needed on that.

ET Now: For the markets you are basically saying that one should sit on the sidelines, wait for the dust to settle and then perhaps enter. What levels do you think one should look at?
Aviral Gupta: The current valuation levels are pretty comfortable at this point of time, but you can start nibbling in. That is something one can do. But I feel the downside risk is high even now because of the global events, and not because of India-specific events.

Source: http://economictimes.indiatimes.com/articleshow/13927756.cms?prtpage=1

Equity mutual funds get surprise Rs 506-cr fresh investments in May.

Nothing would make Indian mutual fund players happier than investors returning to their equity schemes. This turned out to be a reality in May, as retail investors pumped Rs 506 crore in fresh investments in equity categories, after four months.

For the first time this year, equity segments saw positive flows during a month when the key benchmark indices lost over six per cent, amid weak global economic scenario. Fund managers are pleasantly surprised at this development.

The chief marketing officer of a large-sized fund house said, “It’s contrary to our expectations. We had noticed a positive momentum was building up, but had not expected inflows to cross Rs 500 crore. I believe, market corrections propelled investors to get into opportunistic buying, which is good from a long-term perspective.”
 
CHANGE OF FORTUNES
Net inflows in equity mutual funds so far in 2012
Month
Net inflow/outflow
January
-456
February
-2,680
March
-196
April
-455
May
506
All figures in Rs crore
Source : Association of Mutual Funds in India

At a time when the industry had been losing its equity folios and none of the schemes could earn investors positive returns, “positive inflows is quite encouraging,” he added.

Prior to this, the industry had mopped up Rs 360 crore of fresh money into equities in December last year. What followed, gave shocks to fund managers. Around Rs 3,800 crore went out of the system from diversified equity schemes during the January-April period.

Dhirendra Kumar, chief executive officer of Delhi-based fund-tracking firm, Value Research, said, “Indian mutual fund investors have become quite mature. They pump in money when markets substantially correct. In such a scenario, investors need enough confidence to participate in markets on a regular basis. If strong sentiments continue for another few months, I believe mutual fund investors will come back to the markets."

Interestingly, gold exchange-traded-funds (ETFs) saw net outflow of Rs 41 crore while investors continued to pull money out of equity-linked saving schemes (ELSS), which stood at Rs 81 crore in May. Barring these two fund categories, all other segments saw positive flows during the month.

Assets under management as on 31 May stood at Rs 6,99,284 crore.

Source: http://www.business-standard.com/india/news/equity-mutual-funds-get-surprise-rs-506-cr-fresh-investments-in-may/476657/

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