The Hindu Business Line : `Prices of many scrips seem reasonable'

MR D.S.R. MURTHY, Executive Director, UTI Mutual Fund, is not like any of the usual, glib-talking executives that one comes across so often in the asset management industry. For most parts, he has simple, straightforward answers for the most difficult questions.

Here he talks about the MF's stand on stock valuations, developments relating to the UTI-State Street arrangement and its latest offering - a scheme based on the concept of dividend yield. Excerpts:

What is UTI MF's view on current equity valuations?

Some sections think that the valuations look stretched at the moment while others will say there is still much scope for upsides.

We, however, like to submit that prices of many scrips currently seem reasonable. Having said that, let me say that our funds will constantly search for buying opportunities as and when they arise. The idea is to give our unitholders the best possible portfolios without straying from the fundamental objectives of the schemes considered.

Businesses in India are growing at a fast pace and companies, after going through considerable restructuring in the past few years, are performing well. That has lifted stock prices noticeably.

The SSgA deal has not yielded much. What is holding it back?

I would certainly not subscribe to the view that the arrangement with State Street has not resulted in anything. The fact that some time has passed since the MoU with them was signed has led to some uncomfortable posers.

We have in the past taken our case to the regulators and we are likely to do it again. The regulatory bodies are aware that the schemes mooted by us will allow local investors to sample internationally-known equities.

Simply put, the matter is pending before the authorities and a response from them is awaited.

Why do you believe dividend yield is a workable concept?

Consider some of the facts that we have painstakingly collated. In the last 10 years or so, high dividend yield counters have outperformed the BSE-100 index by an impressive margin. This holds true for even the so-called difficult years. The configurations of the top companies in this category have changed from year to year.

Considering the unfailing outperformance, a portfolio based on the principle of dividend yield will not disappoint unitholders.

All said and done, dividend yield has not found much attention from regular investors. The market is much too focused on growth stories. You will agree that many companies have been paying good dividends. Those that are distributing dividends regularly are also companies that have followed sound corporate governance practices. This is true for markets such as in the US.

But many people believe this is a bear market product...

That's just a perception. It is not easy for an individual to identify superior scrips, especially when he or she continually waits for prices to fall to more realistic levels.

In the days ahead it will not be easy to make money as one did in the last few years. Stock selection is extremely important in a situation where volatility is rife and movements are uncertain.

A fund based on the concept of dividend yield becomes essential in such a context.

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