The Hindu Business Line : `Our medium-term outlook is positive on equities'

IN its present shape, Alliance Capital Mutual Fund is quite an enigma in the Indian mutual fund industry. The fund house has gone through tremendous changes in recent times, some of them triggered by developments that subsequently became rather controversial.

Mr Rajnish Narula, CEO, dwells on Alliance Cap's views on the market and its plans for the future.

Excerpt:

How do you think Alliance Cap will evolve in the days ahead?

We continue to remain positive about the future. Among our initiatives is tapping newer markets in the northern and the western region by increasing distributor coverage and sales reach. This, together with an increased focus on retail channel and equity resources, will be a key driver to growth of our business.

In the coming months, we intend to start a sustained communication plan targeted towards investors and distributors. This should inform and educate them about our range of products.

Are there plans to add new products?

Today we offer a family of 13 schemes across the risk-return spectrum. These include both generic and focused schemes. We believe this range caters to the broad needs of the Indian investor. However, there is always room for more need-oriented specialised products.

Considering that, and looking at the market scenario, we are proposing to launch a debt product soon.

Would you let Alliance New Millennium continue as it is?

The Alliance Select Series, of which Alliance New Millennium Fund is a part, was designed to offer investors focused investment opportunities from over 90 per cent of the stock market.

Considering that, any decision to change the investment focus of Alliance New Millennium could also impact the other two funds under the Sector Series.

As a multi-sector fund, it continues to cover technology and technology-dependent companies. That also includes sectors like telecom and media.

In the near future, we may examine the need to re-look at the entire Sector Series range.

What is your current short-to-medium term equity outlook? In which sectors are you currently overweight/underweight?

Our medium-term outlook is positive. The economy as well as corporate fundamentals remain robust, as vindicated by a sterling Q1 performance.

However, there is a near-term concern on the monsoon, and the impact that a poor monsoon will have on the economy.

Subject to this, we believe Indian equities are priced attractively with regard to the growth that they can deliver in the medium-term.

There have also been recent concerns about whether the new Government will continue with policy reforms. To our mind it has done a creditable job on this front.

Currently, we are overweight on autos, telecom, retailing and engineering and underweight on oil & gas and FMCG.

With debt funds returns tapering, where can investors go?

We feel medium- and long-term debt funds will perform below expectations for the next several months.

While there will be trading opportunities, the medium term trend will be bearish. Such a trend will increase the attractiveness of short-term debt funds and floating rate plans.

As the yield curve steepens and credit spreads widen, short-term funds will give a reasonable yield pick-up over liquid plans.

For an investor with a 3-6 months horizon, volatility will not significantly affect returns. An investor with a longer investment horizon should look at medium- and long-term floating rate plans, which will give higher returns.

Short-term money should go into liquid and short-term floating rate funds.

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