The Hindu Business Line : `Indian stocks are more fairly valued than before'

"If you do want a broad-spectrum interaction, there can be a far more relevant discussion on whether there is a case for further upside in key sectors, or whether one should liquidate part of one's holdings at this juncture," he argues.

Excerpts from the interview:

Are the indices rising too fast? Are you comfortable with their pace of growth?

The speed at which the market has accelerated from one milestone to the next has surprised some sections. Stocks have overcome short-term declines to record overall growth.

Investors, domestic and foreign, have bought aggressively at each decline, leading us to assume every time that there is fresh upside around the corner. We need to keep in mind that many sectors have done well on the back of good earnings. Profits of companies have been quite decent for several quarters in a row and this has been mirrored in valuations.

But it is also true that Indian stocks are generally more fairly valued than before.

How did you see the Q3 results?

It is not that there are no surprises, but considering everything, results are not out of line with expectations.

We will have to see how the current quarter pans out before we can take a more meaningful stance. The Budget too is around the corner and, as always, investors will look for clear messages to emanate from the government.

Which sectors do you think will be re-rated in the days ahead?

Investors do expect stocks representing a few segments to perform better than what they have done so far. Take, for instance, oil. The market for all you know is waiting for stronger moves by oil companies. Banks too seem important in this regard.

With more reforms on the cards, investors will want players in the banking space to deliver more. I need not name specific stocks. Also, this is not to say that banking or oil stocks have entirely lost their fan following.

Is there anything that can really spoil the party?

Other emerging markets are vying for investors' attention and a scenario marked by a serious outflow of money from India can be scary. Remember, money will move into territories where the likelihood of returns is the highest.

At another level, the market will watch out movements in petro prices, which had not too long ago spooked a lot of investors. The need of the hour, I think, is robust participation from domestic investors, including the institutional sort. The latter can help the local market stay buoyant.

More retail participation will be welcome as well. This in fact will be particularly relevant, given the low involvement of the Indian households sector in equities. As everyone knows, the under-investment is quite apparent. The sooner this picks up, the better.

Which fund can come nearest to the latest Kotak product?

There is Birla MF's India GenNext Fund... its USP may be compared to that of Kotak Lifestyle Fund, our newest offer. The latter will try to benefit from the kind of changes that so many Indians are bringing to the way they live, consume, entertain and even borrow.

I do not have to point these out one by one because these are quite evident. In fact, never were such changes more dramatic.

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