Life beyond 20,000: Invest carefully

With the equity markets retesting historic highs, you now need to frame your investment strategy carefully. After all, it’s better to be safe than sorry, as the adage goes.

Though India is in an economic sweet-spot presently, the world economy and the financial system face considerable imbalances and uncertainties. Any adverse global development could cause this gush of liquidity, primarily responsible for the swift run-up in domestic equities, to reverse direction pretty quickly leave India.

The way forward

Here are the possible courses of action available to you while framing your investment strategy at this point of time.

1. Invest: Indian equities still offer attractive wealth creation opportunities over the long term. You may hence consider investing into this market if:
Your investment horizon is at least five years and
Your allocation to equity is less than what you had desired or planned and
You are ready to stomach the interim gyrations of the market

Mr. Vikramaaditya, Chief Executive Officer, HSBC Asset Management (India) Pvt. Ltd., shares, “There may be volatility in the short term but the long term growth story is intact. The key to any investment strategy would be identifying the right investment opportunities.’

You may phase out your investments by using Systematic Investment Plan (SIP) for deploying fresh inflows into predominantly large cap funds. If you have a lump sum, you may consider a Systematic Transfer Plan (STP) from short term debt fund to equity fund, gradually.

Tax saving ELSS investments may be phased out over the remaining six months of this financial year. You may consider arbitrage funds for shorter terms as higher market volatility is conducive for such funds.

2. Rebalance: If the sharp run-up of the recent past has skewed your asset allocation towards equity, it’s time to rebalance. You may consider pruning your equity exposure progressively, using STPs to divert flows into a debt fund. This is also the time to rebalance your exposure to mid and small cap funds in favour of large cap ones. Saurabh Nanavati, Chief Executive Officer, Religare Mutual Fund says, “Get your financial planning done with a certified financial planner/adviser and stick to the asset allocation”.

3. Exit: If you need your money within the next two or three years, you should aim to preserve the gains that you’ve already made. You would do well to plan your exit in a phased manner using Systematic Withdrawal Plan (SWP), to minimise the risk of bad timing.

End Note

As Sandesh Kirkire, CEO, Kotak Mutual Fund says, “Investors must remain true to their investment objective, and the consequent investment design flowing from it. Therefore, any event must not be the determining factor in changing your long sought out strategy”.

Source: http://economictimes.indiatimes.com/personal-finance/savings-centre/analysis/Life-beyond-20000-Invest-carefully/articleshow/6633053.cms

Mkts strong: What should be your investment strategy now?

The markets have had a remarkable week, the Nifty has hit 6,000. That’s almost now close to the highs that we have seen, the all time highs. So, that’s a very crucial figure that it has hit.

The markets have been on a bull run, we have seen quite a good run up in stock prices. What really should you be doing at this point of time, if you have already invested or if you are intending to invest?

In an interview with CNBC-TV18’s Vivek Law, Anup Bagchi, ED, ICICI Securities says if one is already sitting on profits, it is a good thing to take some profits out.

He further says if one wants to invest at this point of time, he/she should not invest in a lump-sum manner. “Pick your stock, divide it into four or five or six parts, may be every week you invest and average it out or every day you average it out or every month you average it out.”

Here is a verbatim transcript of the exclusive interview with Anup Bagchi on CNBC-TV18. Also watch the accompanying video.

Q: Increasingly given the manner in which the market has run up, we get calls saying is this the right time for me to invest and of course at the same time you get calls for somebody who is already invested for a fairly long period of time, that is it the right time for me to sell. I know that this is an answer which would depend from stock to stock, sector to sector, but, overall, what is your view of what should a retail investor be doing at this point of time?

A: We also are getting lot of both kind of calls. Two things, the good thing is that most of the retail investors for whatever reason while they have not participated too much in the rally, but they have not got off the trade either. So, people who have had stayed in the market continue to stay invested in the market. For them, a little bit of profit taking could be good because markets are running on three fundamental factors, one is the economy doing well, is the sector doing well, is the company doing well, which is more specific.

Second one is on the valuation. Okay if it is doing well, at what price does it become better or at what price does it become out of reach, which is a valuation factor. And the third factor really would be the momentum factor, which is, is it being driven by liquidity or is it being driven by fundamental and because the valuation is very attractive.

I must confess that I would put 60% weightage right now on momentum, 30% I would put on fundamental factors and only 10% on valuations. Valuations from rich have only become richer. Fundamentally, of course, it is supporting, but large part of this movement and these sharp movements have happened because of gush of liquidity that has flown into the Indian markets, particularly by foreign institutional investors (FIIs). The domestic institutions don’t seem to be buying that much. They do not even have that much of liquidity to buy into the market. So, this is largely a very liquidity driven, momentum driven rally.

So what should one do? If one is already sitting on profits, it is a good thing to take some profits out and put it in debt instruments as well because interest rates are also luckily quite attractive. Good quality fixed maturity plans (FMPs) are coming from the mutual fund. So, they can put in there.

Clients who need to invest or who want to invest at this point of time, one really doesn’t know whether the market is going to go too much up or whether it is going to correct because it has already run up quite a bit. So, what we are suggesting to them is you must be invested in the market, but at this point of time do not invest in a lump- sum manner. That is if you have got a lakh of money to invest, do not go and jump one day and get overly excited and invest all of one lakh in one day. Pick your stock, divide it into four or five or six parts, may be every week you invest and average it out or every day you average it out or every month you average it out. But essentially get into the systematic investment plan not of the mutual fund type, but of the equity type, if you figure out that this is the stock that I need to buy. That way one will be able to average, one will be able to get the benefit of not timing the market or not trying to time the market and a benefit of a slightly long-term investing and getting the benefits of both upside and if there is a correction on downside as well. So, that is a generic thing.

Q: I am a new investor entering the market, would it be a safe bet to start with oil and gas sector?

A: I would tend to agree that when you do your first few investments, up to 70% should be in largecap diversified where you get an overall benefit of the market, 20%- 40%, from time to time you can take sectoral bets. There I would say that it might be a better idea to put part of it, 60%-70% in the largecap diversified funds, so that if the markets tend to move up then you get the benefit of the overall movement of the market.

Coming to oil and gas sector, I think oil and gas sector is a policy bet. We all believe that all these companies, all the PSU companies are very strong, they are very asset rich, they are very well run and this is more of a policy bet and that if reform comes then it will start to do better.

Within oil and gas sector if you have some knowledge and if you have done some reading in oil and gas sector, if you were to pick up a stock, I would still say that GAIL could be the better of the stock because I don’t think you will be able to diversify too much between oil and gas sector. But I would say first 70% of your money, whatever is the money, try and invest it in the large cap diversified. Thirty percent if you want to get a sense of stock market, in oil and gas sector you can invest with the stock that I am just suggesting.

Source: http://www.moneycontrol.com/news/market-outlook/mkts-strong-what-should-be-your-investment-strategy-now_486847.html

‘Infrastructure stocks, a good bet' CIO-EQUITY, ICICI PRUDENTIAL MUTUAL FUND

The market does offer pockets of opportunity such as infrastructure stocks, where money can still be made. However, investors should not make any sudden shifts in their allocation to equities, cautions Mr Sankaran Naren, CIO- Equity, ICICI Prudential Mutual Fund, when Business Line spoke to him about the Sensex at 20,000.

The Sensex has hit 20,000 again and there is a lot of scepticism about the markets holding up at these levels. Normally markets never correct when everyone expects it to! What are your thoughts on this?

In the Indian markets, there are two types of investors — locals and foreigners. Yes, the locals are very sceptical about the markets and valuations because India is the only market where they invest.

We can afford to be sceptical! The foreign investors don't see growth in their home markets, and thus, find Indian stocks with their strong growth potential, attractive. Local investors have not invested in the markets and local institutions have been consistent sellers in this rally.

You must understand that mutual funds sell only if they have an outflow from their retail investors. We don't operate like hedge funds! In our case, the outflows have been small. However, the industry-wide outflows must be significant, given the consistent domestic institutional selling in stocks that we have seen over the past few months.

One clear theme driving this rally has been domestic consumption. The sectors leading it were consumer durables, to automobiles to FMCGs. What's your take on those stocks now?

I think infrastructure should be the driving theme for India. If you compare China and India, the consumption part of GDP is lower in China and is higher in India. China has a current account surplus while we run a deficit. If you see infrastructure bottlenecks, it is in India that we face them to a large extent. That makes a case for playing the consumer theme in China and the infrastructure theme in India, while the reverse is happening! I think as we approach the retail consumption season with festival sales and so on, this would be cyclically the appropriate time for the consumption theme to peak out.

The ICICI Pru Infrastructure Fund has managed a five-year return of 25 per cent, but has underperformed diversified funds in one year. What's the argument for investing in infrastructure stocks now?

That makes it a good time to invest in the fund. There is a big gap between what has happened on infrastructure and non-infrastructure stocks. Look at the stocks that represent the infrastructure theme; the theme has been a substantial underperformer. Whether you take power utilities, capital goods or even construction stocks they have all underperformed very sharply. If you look at the non-infrastructure space, whether FMCGs, autos, pharma or technology that is where all the outperformers have come from.

Here, consumer stocks have also moved to a premium over the market while infrastructure stocks have seen valuations correct significantly. If you had to invest now, this makes infrastructure a good bet. Valuations in the sector today are much more comfortable than valuations of sectors that have led this rally. I think Indian infrastructure stocks benefit from the fact that demand potential is so high. In the US, for instance, power utilities are dividend yield stocks. In Europe, again, such stocks are not growth plays.

Are infrastructure companies delivering the expected earnings growth?

One factor that is acting against short-term earnings for the sector is the fact that we have had a good monsoon this year. A bad monsoon aids construction activity but a good one leads to a seasonal disruption. This is reflecting in the quarterly numbers. But it does not in any way alter the outlook for the infrastructure sector. We think the period from 2011-2014 will see an infrastructure-oriented cycle.

Another factor is that infrastructure spending is now being driven to a large extent by the private sector and not just by government. If you break it down, power generation capacity is now being driven mainly by the private sector. If you take roads, you have a fair number of projects happening through BOT route. In ports, a number of projects are coming in through the public-private partnership route.

The earnings growth for Indian companies over the past two quarters has not been too high, the earnings for the CNX 500 companies, for instance, has grown only in the single digits. Is that not a risk to the current valuation of 23 times for the market?

The problem is that market valuations have really climbed and stocks have become more expensive. Expectations have risen to a very high level and those expectations are barely being met by earnings.

There is also divergence, where some companies are meeting those expectations while others are not. The problem about valuations is that we cannot today say that Indian markets are cheap. They are expensive relative to rest of the world. For this valuation to sustain, the results have to be good and the GDP outlook has to remain good. If you look at where we were six months ago and where we are now, there is risk. On the positive side, food inflation is not accelerating any more and the monsoons have been good.

What explains the surge in FII inflows in the past month, where over $3 billion of funds has come in within a month? Is it the upward revision in GDP outlook which has made the difference?

In my view, there has been a growth scare in the Western world and a growth scare in China as well. Consequently, all the growth-oriented money has come to India. That has, however, resulted in a situation where the Indian market is no longer cheap. Certain segments such as infrastructure may be cheap, but not the market as a whole.

A lot of the recent inflows into Indian markets are said to originate from passive Exchange Traded Funds who are only chasing the index. Do you thus, see the gap between index stocks and other stocks widening?

I am not sure if that is entirely correct. If a good portion of that money was ETF money then why would we see such a big sectoral deviation in performance? And it is not as if only benchmark stocks have performed. Even smaller stocks within the consumer theme have performed. The advantage with large caps is that they are less dependent on how interest rates pan out. Small and mid-caps are vulnerable to interest rate risks, especially in infrastructure stocks.

We believe interest rates will peak over a six-month period and then one can move from large caps to mid-cap stocks. You are also approaching the busy season in credit, with activity in the short-term money market peaking in March each year.

If retail investors have lost out on this rally, what should they do now?

I would suggest three things. Investors should look out for pockets of opportunity such as infrastructure stocks, which remain attractive. They should invest through systematic investment plans. And they should not make any sudden shift in their asset allocation towards equities.

Source: http://www.thehindubusinessline.com/iw/2010/09/26/stories/2010092651171200.htm

Equity schemes make a dividend splash in Sept

With Sensex soaring to 20,000 levels, equity fund managers have started booking profits and declaring dividends. Over 13 equity funds have declared dividends in September, with many more planning payouts during the forthcoming festive season.

Equity schemes of Birla Sun Life Mutual Fund (MF), DSP Blackrock MF, UTI MF, Canara Robeco MF and Fortis MF have recently declared dividends. Around 55 schemes, or 25 per cent of all the schemes, have declared dividends in the last three months. Markets as measured by the BSE Sensex are up 11.5 per cent in September. Said Amit Nigam, senior portfolio manager, equities at Fortis MF: “Declaring dividends is a regular process and rising equity markets isn’t the only reason.” He adds that dividends are a systematic way of distributing returns earned by the fund to investors.

Equity funds have declared 7-22 per cent dividends in September. Interestingly, the dividend payout has not been higher this time. Fortis Dividend Yield declared 15 per cent, which amounted to a payout ratio of 11.5 per cent. In the past, payout have been above 20 per cent levels. Templeton India Equity Income (4.2 per cent), DSPBR Top 100 (5.7) and Birla Sun Life Buy India (6.7 per cent) were among the funds to make lower dividend payouts. Payout ratio is calculated by dividing dividend declared by the net asset value (NAV) as on on the record date.

Fund managers are finding their hands tied with the latest rules barring them from paying dividends from unit premium reserve. MFs can pay dividends only out of their realised gains now. “Recent regulatory changes on dividends are prompting fund managers to book profits regularly in rising equity markets to distribute dividends,” said Dhirendra Kumar, CEO of Value Research. Any correction, after all, could spoil their chances otherwise. Kumar expects more equity funds to declare dividends in the coming months.

The sales head from a leading fund house said: “Dividends are also a way of targetting new investors.” Even though post dividend declaration, fund NAV falls to the extent of dividend declared, MF investors often tend to get lured by it, by associating higher dividends with better performance. -FE

Source: http://www.indianexpress.com/news/equity-schemes-make-a-dividend-splash-in-sept/687567/0

Bond traders see sell-off if borrowing not cut

Indian bond traders are bracing for a sell-off if the government sticks to its planned 1.7-trillion-rupee ($37.2 billion) borrowing plan for the second half despite a sharp rise in federal revenues. Six out of 10 market participants in a Reuters survey expected no change in the borrowing when the October-March schedule is announced on Thursday, traders said.

Four participants saw a possibility of 100 billion to 150 billion rupees reduction in the borrowing. "The market will react negatively if there is no cut in borrowing and the 10-year yield could rise by about 5 basis points and the 5-year OIS rate could rise by 2-3 basis points," said Anindya Das Gupta, head of treasury at Barclays Capital.

The government had planned to borrow a gross 4.57 trillion rupees in 2010/11. Of the budgeted 2.87 trillion rupees to be raised in April-September, it has borrowed 2.73 trillion so far. Government revenues have been boosted by an auction of 3G and wireless broadband spectrum that raised 1.06 trillion rupees, about three times more than expected, thanks to aggressive bidding by firms in the world's fastest growing mobile market.

Tax receipts have also been buoyant on the back of a rebounding economy. April-August net direct tax receipts rose 13.9 percent to 1 trillion rupees from a year ago. The benchmark 10-year bond yield could rise to 7.98 percent if the government does not reduce the borrowing, traders said.

The bond was trading at 7.94 percent by 0626 GMT, steady from its previous close. Traders said a token reduction in borrowing was unlikely to spur a rally in bonds, with some hoping the government may await divestment proceeds from state companies in the coming quarter before deciding on a cut. State-owned Coal India Ltd, the world's largest coal miner, is set to launch an initial public offer in October to raise up to $3 billion, with the government selling a 10 percent holding.

"Divestment proceeds remain a surprise factor and they (the government) could look to mop up more than budgeted," said Dwijendra Srivastava, head of fixed income at Sundaram BNP Paribas Mutual Fund. "They may not look to borrow much in the months of Feb-March." In early August, the government had approved an additional expenditure worth about 550 billion rupees, which could absorb revenues.

Source: http://economictimes.indiatimes.com/Bonds/articleshow/6612101.cms

Presently, short term funds are more suitable: Mahhendra Jajoo

Mahhendra Jajoo, Executive Director & CIO - Fixed Income, Pramerica AMC in an exclusive interview with Harsha Jethmalani of Myiris.com spoke about their newly launched fund and products in pipeline, his views on the FII inflows in the Indian markets, etc.

Mahhendra Jajoo has over 19 years of experience in financial services and capital markets. Prior to joining Pramerica AMC he was working with Tata Asset Management as Head - Fixed Income and Structured Products managing Fixed Income investment/portfolio from June 2008 to Dec.2009. Mahhendra Jajoo has completed his B.Com, ACA, ACS, CFA ( from CFA Institute, USA).

>What is your investment philosophy for debt schemes? Could you throw some light on the structure of your research team?

Our investment philosophy focuses on constructing a diversified portfolio of highly rated instruments with the objective of generating competitive returns within the scheme investment objectives and constraints.

>Pramerica Liquid Fund collected Rs 6.65 billion; what kind of response are you expecting for recently launched Ultra Short-Term Bond Fund? How are you going to target potential investors for the same?

We have seen our AUM increase over the last month as more and more investors consider Pramerica Liquid Fund to meet their investment needs. With further increase in interest rates by the RBI, debt is becoming more attractive. Pramerica Ultra Short Term Fund offers better tax efficiency to investors therefore, we expect many new investors to invest in this fund.

>Can we expect more new product and innovative products from your AMC this year?

Pramerica Mutual Fund aspires to provide innovative products that will help the investors to create wealth. We will launch new as well as innovative products from time to time reaching to retail investors and bringing to them solutions rather than just products. We will also help our investors to bridge the gap between their aspirations and their current financial positions.

We are already managing the Pramerica Liquid Fund and we recently launched our Ultra Short Term Bond on the Sep. 16, 2010. Two other products are lined to be launched in October, although the exact dates have yet to be finalized.

>What is outlook for Rupee, home loans and deposit rates after RBI has raised benchmark interest rates?

Given the strength of Indian economy and continued inflow of foreign investors, we expect rupee to trade with a strengthening bias. Home loan and deposit rates may go up a bit more given the RBI`s current stance of tightening rates.

In the current market scenario, what investment strategy an investor can follow while investing in different kinds of debt/income based funds? If an investor only prefers to invest in debt funds what can be his right portfolio mix.

Presently, short term funds are more suitable as interest rates are still going up and liquidity is tight. Once a clear trend for lower inflation emerges, longer tenor funds may become attractive.

>Where do you see the yields on g-sec heading in the short term?

Given the offsetting factors of likely improved fiscal deficit and higher inflation, we expect g-sec to trade sideways in a narrow range.

>Foreign fund houses have invested over Rs 710 billion (USD 15.6 billion) so far this year and analysts believe that FII investment in stock markets will cross the last year`s record level. What is your take on this?

India is the second fastest growing economy at present. Structural factors will ensure that this trend is maintained in the foreseeable future. India is also, one of the few markets to reach a new high since the fiscal crisis. As global capital searches for high returns, India will remain attractive to FIIs for a long time to come.

Source: http://www.myiris.com/shares/company/ceo/showDetailInt.php?filer=20100923115620707&sec=fm

'There's no scope now for poor performance'

Nilesh Shah has tracked the Indian stock and bond markets for nearly two decades now. The deputy managing director of ICICI Prudential AMC points out that few markets have traded on a sustained basis at the kind of multiples that India trades at today and tells Shobhana Subramanian that there is now virtually no room for error.

Now that the Sensex has hit 20,000, where do you think the market is headed?

It’s a journey and yes, while 20,000 is an important psychological benchmark, it too will be forgotten like 10,000. It’s difficult to take a short-term call on where the market is headed but the positive that is supporting the market is flows, more from foreign institutional investors than locals. That’s probably because an Indian investor evaluates his investment opportunity by comparing it to the 8% risk-free return on the government benchmark whereas an American investor evaluates the Indian opportunity against the 3% government benchmark and a Japanese investor against a 1% return. So, the expected return for an Indian investor is very different from that for foreign investors. That possibly explains why they are bullish and are investing whereas we are becoming somewhat hesitant. But it’s the flows that are driving prices higher.

So, are valuations looking terribly expensive?

Yes, valuations do look expensive; they may not be outlandishly expensive like they were in 1991, 2000 or 2008 but they are not cheap like they were in 2009. And they are looking expensive both in absolute and relative terms. Historically, India has traded at an average multiple of 15 times one year forward earnings but today we are trading at 17.5 to 18 times one year forward earnings, so we are clearly at a premium. We are also more expensive compared to Russia, which is probably trading at 8-9 times or Brazil which is at 11-12 times or China which is at about 15 times. If I compare India to the developed world, which is probably not the right comparison, we are expensive. And even within BRICs, we are expensive.

But doesn’t India deserve the premium?

There’s no doubt that India deserves a premium, the question is how much of a premium. In the past we have seen that when the difference increases too much and too fast, then it starts cooling off. So, there’s no debate about whether India deserves a premium over Brazil or Russia because we have rule of law, better corporate governance standards, better entrepreneurs, we have democracy and all this reflects in the higher return on equity in India. But at the same time, how much higher can the premium be?

Where do you feel India should trade vis-à-vis peers like Korea or Taiwan?

It’s difficult to put an estimate on the premium today because it would depend on how Korea and India behave. Apart from fundamentals, there is also the issue of sentiment. All we can say is that today we are trading at reasonable premiums over our peer group and this is justified based on long-term fundamentals. But this means we have to deliver in line with expectations. And there is absolutely no scope for poor delivery or tardy delivery.

What is your reading of the June 2010 quarter numbers and do you feel that there are downside risks to earnings estimates?

The June quarter numbers were more or less in line with expectations in some segments like mid-cap tech, which turned in results below expectations. Is there a risk to downside earnings based on the June quarter numbers? The answer is no. But those were the earnings required when the market was at 16,500. But now that the market has crossed the 20,000 mark, obviously the earnings expectations have gone up and those enhanced earnings expectations will have to be met in the coming quarters. With the index having moved up, earnings expectations have gone up.

From what you’re seeing on the ground, do you feel companies will deliver?

That’s a million dollar question but I get the feeling that the market is expecting companies to deliver. My own feeling is that for the broad market to deliver the enhanced earnings expectations is going to be a tall order. We have to run faster and work much harder to meet those expectations. Certainly we have raised the bar for our companies and in a world where variables are changing virtually every day, it requires greater effort to get there. That doesn’t mean we won’t be able to do it. What you’re saying is that rather than the market trading at these high multiples, it’s earnings that need to grow faster now… How many markets have traded at 18 times one year forward on a sustained basis? Very few. So companies will have to grow and that won’t always be easy because our companies have also scaled up significantly so the base is no longer small. What I’m saying is that I don’t think valuations can remain at 18 times forward forever, they will change either way depending on how companies perform. So let’s not take this 18 times one year forward for granted.

What do you believe is a sustained multiple that India can command?

We are now priced for perfection. From 10 times forward in 2009, we have travelled to 18 times; in less than 24 months, we have shifted from all-disappointment to no-disappointment. There is a potential for a re-rating but it’s hard to say right now at how much of a higher multiple India can trade relative to the historical average. To take a call on earnings itself is difficult, to take on a call on earnings re-rating is adding to the complexity.

Given that there is going be abundant liquidity in economies overseas and that interest rates are going to remain low, do you see flows continuing?

In the longer term, chances of flows moving from developed markets to developing markets like India in search of growth are high. But it doesn’t mean that this can continue at every level of the market. At some point in time, the gap in the valuation of say India and China, Brazil or Russia could force the money towards those markets rather than ours, depending on which economy is doing well.

But it’s also a fact that India is underweight in many global funds…

That is true; we haven’t seen too much money from many of these big foreign funds. But at the end of the day, the money will come in depending on how we perform. There is possibly unlimited quantum money sloshing around in the system, globally. In the American money markets, funds have $3 trillion, virtually yielding less than 0.5%. Logically, they should shift all their money into Indian equities because these are expected to post better returns. But things don’t always work on logic. There is a balance of Rs 4 lakh crore in Indian banks yielding a 3.5% return; this should also have shifted.

But we’re talking only of equity funds...

Allocations are not made only on the basis of fundamentals, but also sentiment and valuations. It would be unfair to think that all global equity funds would have a 1% allocation at today’s valuations, which are priced for perfection; though I would love to get such a high allocation. They are expecting delivery in terms of growth, equilibrium of our macros in terms of interest rates, inflation, fiscal deficit and current account deficit. They’re expecting seamless growth in earnings. We are carrying the burden of too many expectations.

Once again, small investors have missed the rally…

We haven’t encouraged an institutional culture in equity investments. Our pension funds never invested in equities and our insurance companies came pretty late and while there was an LIC, the investments were tilted towards fixed income rather than equities. So, somewhere the institutional participation hasn’t been too high. Also, the relative performance of real estate and gold in recent times has attracted retail flows since investors are more comfortable with those assets.

Source: http://www.financialexpress.com/news/theres-no-scope-now-for-poor-performance/686238/0

Market voice: Prateek Agarwal, Bharti AXA Investment Managers

Prateek Agrawal, head, equity, Bharti AXA Investment Managers, tells Krishna Merchant that the current valuations are not worrisome, as they are at much more comfortable levels compared to the last time when the Sensex was trading at 21,000. Edited excerpts:

The markets have been on an upward spiral for the past few sessions, with a good number of stocks touching new highs. Do you expect this to continue?
The last time when the Sensex was higher than 21,000, PE ratios were significantly higher than the current levels. Since the last rally, earnings have expanded and there is much more valuation comfort now.

The markets are likely to move higher, and the up-move in terms of percentage will trail the rise in earnings. The markets did not move much for eight-nine months. It is only in the last one month that they have rallied and have undergone a serious amount of time correction.

Once this up-move is through, we expect to see a time correction again, rather than a price correction. We expect the index to move sideways. Over the time, earnings will catch up with valuations.

Is this a good time to book profits in the midcap and small cap stocks?
Market participants have been booking profits of late. If you look at the mutual fund (MF) data, it is clear that MF as a category has been experiencing strong outflows at higher levels in the market.

Considering that markets will rise further, what will be your best bets?
Banking will be one of the drivers. Metal and mining can also do well, besides infrastructure, as the economy is booming. At a later stage, once the confidence in the level of the market is restored, we may see the breadth of the rally expanding.

Source: http://www.business-standard.com/india/news/market-voice-prateek-agarwal-bharti-axa-investment-managers/408846/