'Interest rates tend to be cyclical'

MANAGER SPEAK/ Ved Prakash Chaturvedi, chief executive, Tata Mutual Fund

Ved Prakash Chaturvedi

The fund's portfolio turnover has been high. How far has this affected its performance?

If we find an opportunity for value creation in a company, we buy it but with a focus on an exit price after achieving the targeted appreciation.

When this happens, the fund manager will have to look at the security and either fix a new target exit price or shift out of the security.

In a rising market these exit prices would be achieved more rapidly, and hence the portfolio turnover may be high. Against the recent uptrend, we have had some profit-booking which might have changed the portfolio's complexion.

The fund has reduced its exposure to mid-caps. What is the rationale behind this?

Companies in a segment may be undervalued compared with the broader market. But this undervaluation may get corrected over a period of time and target prices may be achieved.

So the segment may have a smaller representation as the fund looks to buy into other attractive companies. We would focus on undervalued segments rather than sticking to any specific approach.

What is your outlook for the equity markets?

Long-term investment horizons help investors even out short-term fluctuations in market prices. The Indian economy is expected to grow 5-6 per cent per annum.

A growth of this nature points towards a sanguine outlook for equity investing. From a short-term perspective, investors could be careful. However, from a medium term-perspective they can invest in equities as per their risk appetite.

Where are interest rates heading?

Considering inflation and the growth the Indian economy is likely to witness, an upward bias on interest rates seems likely.

However, interest rates tend to have a cyclical movement and would react to economic cycles.

The upward bias can be altered in case of a slower-than-anticipated rate of growth for the global and Indian economies.