The Hindu Business Line : `Cement, capital goods will outperform broad market'

SBI Mutual Fund, which has just entered into a tie-up with Societe Generale, is seeking to change some of its key systems with the hope of becoming more market-oriented.

The fund is also actively modifying its portfolios in line with changes in the investment climate, says Mr N. Sethuram, CIO.

Excerpts from an interview with Business Line.

Going forward, which sectors do you feel will assume more importance?

Let me name two sectors that we are currently overweight on - cement and capital goods. These, we believe, will clearly outperform the broad market. And not without reason.

Cement is likely to gain from India's booming housing and construction activities, and especially so because of the growing focus on infrastructure projects. Cement prices are expected to move up in tandem. On the capital goods front, we feel turnkey companies will see an upswing.

SBI MF is also positive, although very selectively, on technology and automobiles. However, we have streamlined our allocations to some of these segments in recent times. Our strategies are reflected in the kind of portfolios we have built.

Does SBI MF have enough product differentiation on the equity side?

We already have a fairly wide range of equity schemes, each catering to investors in a different way. There is, for instance, a diversified scheme that now offers a blend of large and mid cap stocks. This should appeal to those who are increasingly trying to identify good mid cap names, ones that should accompany their larger cap counterparts.

We also have the Contra Fund, which picks up relatively undervalued stocks by following a style that is somewhat contrarian. The strategy has lately performed well in terms of returns. The general idea is to offer investors with multiple options. They should be able to choose the most suitable schemes, depending on their risk profiles and return expectations.

How will your forthcoming scheme, with its focus on emerging businesses, add to your forte?

We have developed it on a simple premise. You will appreciate that there are a number of areas that are poised for growth. Not all of these are entirely new sectors; in fact, some are quite old, but have been constrained in the past by limited growth opportunities.

One can cite textiles as an example. More specifically, the Emerging Business Fund will tap such areas as auto ancillaries, mid-cap pharma and power. The scheme, mind you, will not be a call on the broad market.

The prospects of the sectors and stocks that are identified by the fund manager are likely to go up over, say, the next 12-24 months, while the broad market may not display a similar resilience.

What can investors expect from SBI MF, now that SocGen is involved?

SocGen, as you know, runs a major set-up and is strong enough to be our partner. Their involvement will imply value addition in more ways than one. I cannot be more specific than this at the moment... but its contribution will certainly be significant as we go forward.

The fact that they are actually putting in money is an important indicator of what may happen.

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