The Hindu Business Line : `Correction may be in order at this stage'

MR VED PRAKASH Chaturvedi, Chief Executive, Tata MF, bluntly tells Business Line that long-term investors will do themselves a huge disservice if they consistently stay away from equities.

He also feels that the market will soon begin to consider hybrid products, complete with different combinations of debt and equity instruments, more actively.

Excerpts:

Will equities deliver, now that the market has already moved up appreciably?

The broad market, as represented by the main indices, has been moving up for some time and a correction may be in order at this stage. I cannot predict more than this or even venture out to suggest how the corrective phase will finally pan out.

But let me simply state that equities are not likely to disappoint those who have time on their side. Equities are capable of rewarding the long-term investor provided the process of stock selection has been efficient enough.

Investors, however, must pay attention to the factors that normally drive the stock market as well as the issues that are likely to determine its movements in the foreseeable future. There are a number of reasons why the corporate sector in India should generally continue to perform decently. A steady improvement in investment interest is expected as we go ahead.

On the other hand, there are a few possible negative scenarios too. Some of these can stem from the external environment, while some others can be purely domestic in origin.

Some quarters feel there will now be tardy product development on the debt side. Do you agree?

Not really... this actually reminds me of a story about the early sceptics who had said that the automobile won't flourish as it will make no major difference to transportation!

I think sections of the market will still go in for debt funds in one way or other. Some utility value will be left behind in spite of everything that is happening. It is true that investors are perturbed by what they have seen so far.

Hopefully, the cycle will turn and the debt scenario will start looking up. Till then, the situation may prompt the market to look at hybrid products more closely. This has already happened to some extent, which is evident from the support that the monthly income plans have garnered in recent times.

The market has also tested hybrid offerings that have higher allocations to equities.

How will you position your latest offer, the dividend yield fund?

It will be made to ride on the back of the dividends that have been lately declared in some of our equity funds. These include our scheme based on the P/E multiple theme. The latter has just come up with its maiden dividend, just a few months after it was introduced.

Dividend yield, as an investible theme, is expected to appeal to investors who wish to add value to their existing holdings. It is only now that the fund management industry in India is warming up to the concept of investing in high dividend yielding stocks.

It is early days yet but we expect to create considerable retail interest in it. We already have a number of diversified, actively-managed equity schemes.

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`Correction may be in order at this stage'