The Hindu Business Line : `Equity funds still hold value for investors'

AS the latest numbers show, India's biggest asset management company UTI Mutual Fund has maintained its lead over its nearest rivals. It now has an asset base of over Rs 20,000 crore. In the coming days this should act as a special impetus for the fund house, says Mr A.K. Sridhar, Chief Investment Officer, UTI MF.

"We hope to derive maximum mileage from the situation", he tells Business Line.

Excerpts:

How did you fare during the recent burst of IPOs?

We saw it as a chance to pick up a number of good stocks. Many of our schemes, including some of the balanced funds, participated in the offers. They have received decent allotments as well. We had in fact prepared ourselves for the IPO season by maintaining an improved cash position, prompted by the need to put in subscriptions.

UTI MF's petro fund, for instance, was active on this front as some of the companies in its chosen sector were raising equity.

Has this cash been deployed?

Yes, we have utilised about Rs 600-650 crore till very recently. Investments have been made selectively, based on the feeling that stocks will clearly see an upside. Considering all our schemes, equity now comprises approximately 58 per cent of our total asset base.

Let me tell you here that equity inflows into some of our major funds have been lately going up. I am referring to inflows recorded during the last two months or so.

It seems equity funds still hold a lot of value for investors, especially so given the feeling that debt may not provide them with anything to write home about.

Do you think investors will be able to make money from equity this year too?

I don't want to comment if you are referring to direct investments in the stock market. That has been a very risky proposition in the past and still remains so that way.

But if you consider taking exposure to actively managed equity funds, I am sure that there is enough scope for earning double-digit growth this year. I expect this to happen even at these valuations. But fund managers will have to be particularly vigilant this time. They must keep a close eye on developments and ascertain whether these will have any impact on their portfolios.

A good stock-selection system should be able to do the trick. As it is, people are beginning to get very choosy about the stocks they accept and the ones they reject. And this is a trend that will only get stronger in the days ahead.

Can you list the themes that UTI MF will watch out for in this situation?

Let me mention a few important ideas, ones that I think will turn out well — pharma, power and PSUs.

The pharma story is well known and has been discussed in detail. Consider the power sector, where a lot of reforms are happening. Companies are expected to benefit from such developments. Then there are players that are servicing the power industry in various ways, for whom orders are getting generated quite satisfactorily.

Next, take PSUs. There are public sector entities that are likely to do very well over the next few years. These are equipped with strong HR capabilities. These have made good money in recent times. I am not necessarily talking about the oil and gas companies. There are others that are quite promising.

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