Madhusudan Kela does not want to talk much about his new role, moving beyond his core competency in equities. As the new chief investment strategist of Reliance Capital, he will now play an important role in expanding assets across various businesses. In an interview, he talks about why he is looking forward to providing strategic guidance on investment decisions across the group companies. Edited excerpts:
What would be your role as the chief investment strategist of Reliance Capital?
The team will come up with investment themes that would be passed on to the group companies. But, I will not be taking the final call on investments. I will only be guiding the people of, say, the mutual fund arm or the private equity division. If the strategy team feels a certain sector is looking attractive for investment, we might pass on our analysis to the mutual fund arm. There are two main responsibilities — investment and business development. My new objective is to add strategic value to the investments.
What would be your approach to potential investment ideas?
I am going to look at all underperformers but will be very selective. My new role would also allow me to look at the unlisted space, which was not the case at the fund house.
Market experts have been talking about an impending correction. What is your take on it?
There could be a correction of 8-10 per cent. In the short-term, domestic entities, including mutual funds and insurance, hardly have any liquidity. It is all FII money that is driving the market. So, tomorrow, if there are any fresh concerns raised on the global macro-economic front, the FII flows could see a major reversal. We have seen $12 billion pouring in this year; a couple of billions might just vanish. We saw almost $3 billion invested in India in the recent past and the Nifty has not even moved 100 points.
For how long do you expect such uncertainty to persist?
The moment there is a substantial correction, many of the FIIs who are sitting on the sidelines might jump in. They would find the valuations attractive. Even local money would start coming in. And even if the market stays at the current level for 6-7 months, then analysts will start looking at the FY12 and FY13 earnings, which talks about a 20 per cent earnings growth. The market will then, once again, start looking cheap.
A lot of hitherto unknown stocks have been seeing massive movements. Does this trend worry you?
I am clearly worried. Some of the mid-cap and small-cap counters are seeing daily volume that is more than double their equity capital. A lot of hot money is going into such stocks. At the time of correction, these stocks would see major correction.