'Valuations attractive for long-term'

MANAGER SPEAK/Sukumar Rajah, director and CIO (equity), Franklin Templeton Investments

The fund has outperformed its peers consistently besides notching up a handsome yearly return in 2003. What are the factors that contributed to this?

In 2003, Indian equity markets were grossly undervalued given the improving fundamentals. A change in global liquidity, lessening of selling pressure from UTI and increased optimism among retail and foreign investors led to a sharp rally.

The fund's portfolio was ideally positioned to take advantage of the rerating that happened in 2003.

FMCG and IT stocks form a significant part of your portfolio. Given the rather subdued performance of these sectors of late, what is your outlook for them?

Over the long term, the changing demographic profile of India and the expected improvement in income levels will lead to a growing demand for a range of goods and services.

This is expected to benefit a wide swathe of companies in all sectors of the economy, especially consumer goods companies.

The Indian IT sector has not only exhibited good growth in the trying conditions of recent times, but has also been gaining market share the world over.

We expect companies which have an established clientele, size, processes and distribution networks to capitalise more on the outsourcing phenomenon rather than the second-rung firms.

What is your outlook for the stock markets?

We believe that 2004 will be a challenging year for the equity markets with consolidation taking place ahead of the national elections.

On a P/E basis, the Indian markets are at a 10-year historical average. But we feel it is attractively valued for long-term investors, considering the strong fundamentals.