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'Our strategy is essentially bottom-up'

Q&A: Rajiv Anand

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Vandana Mumbai
Last Updated : Feb 05 2013 | 3:21 AM IST
on a wide range of issues. Excerpts:

What's your assessment about the markets and their direction in 2-3 months?

Markets are grappling with global uncertainty and this will prevail for some time. Money has been flowing out of emerging markets and this has made matters worse. FII selling could be a mix of redemption pressures, aversion to risk and re-balancing of portfolios. Since capital has become scarce for some large banks, they are unwinding some of their proprietary positions from their balance sheets.

However on a longer term basis, the global and local interest rates will ease sooner than later. Measures taken by the US Government for containing sub-prime meltdown will begin to play out. The macroeconomic fundamentals in India continue to be robust. Hence, we find the current market levels attractive from a long term perspective.

Do you see a liquidity squeeze in the Indian markets?

The macro economic picture, including the benign inflation rates and GDP growth, are still intact. India will continue to be among faster growing economies in the world. In an environment where investors are willing to pay a premium for growth, it is highly unlikely that foreign fund flows will stop.

The attraction for india is fairly compelling. On the other hand, equity as an asset class is hugely under-owned by the local investors. This situation will get corrected over a period of time, with investors getting into equity markets through mutual funds and insurance products.

Are you witnessing redemption pressures?

No, not at all. We are actually seeing money coming into our funds. Our NFO which is closing on February 15th should see reasonably strong inflows.

How do you see the IT sector? Is the picture still gloomy or is there reasonable rationale to buy into these companies?

The negative sentiment for IT companies stems from an appreciating rupee and rising wage costs. However as the rupee is overvalued on a trade weighted basis, the risk of a further appreciation is low. It is still unclear whether future orders from Wall Street banks will be impacted by their huge writedowns. All said, a lot of this has already been priced in. So, IT looks interesting at current valuations.

The primary market is in shambles. What is your opinion on what one could see next?

It is nothing new. We have seen these cycles in the primary market. Over the last few years, there have been phases when everything went well in the primary market. Then, we suddenly saw the interest waning and the next wave of IPOs would carry more reasonable valuations, leaving something on the table for investors. This has taught the retail investors that IPOs are not always about easy money.

How do you see mid-caps and small caps panning out?

If you look at data over the last 5 years, small and midcaps have outperformed the large caps. The volatility they exhibit is a little higher but as long as volatility is compensated with higher returns, it's not a cause for concern. If one wants to participate in the India growth story, there are positive arguments in favour of mid and small caps.

Nimble managements, strong growth, low leverage and new sectors are not available in the large cap space. History has shown that outperformance in large caps has come through new sectors. So why not invest in new sectors when they are still small. However stock selection is critical and one needs to have a sound understanding of businesses in this space to make money.

You have launched a small and mid-cap fund.Tell me something about this fund.

This fund looks at a company not so much in terms of its market cap, but where it is positioned in the lifecycle. It then classifies the company as a small cap where you are trying to manage the execution risk or a mid cap company where focus is more on valuation risks.

So, we are essentially looking at three types of companies, one, with existing brands and cash flows but still in a high growth phase cycle, secondly, high growth companies in new sectors and thirdly, relatively young companies with a high growth potential. We have proven our capabilities in the small and mid cap space, as demonstrated by the Standard Chartered Premier Equity Fund.


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First Published: Feb 15 2008 | 12:00 AM IST

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