The Hindu Business Line : `There may not be significant re-rating of any sector'

FAIR value plus. That is how Mr Nilesh Shah, Chief Investment Officer, Prudential ICICI Mutual Fund, would like to describe the majority of Indian stocks at this juncture.

"There may not be a significant re-rating of any sector for the time being. However, there is surely scope for specific stocks to move ahead," he told Business Line.

Excerpts:

The Sensex has seen 10,000 points and more. Is more steam left?

The index has scaled up well in recent days on the back of some enthusiastic buying by investors, both foreign and domestic. The movement from 9,500 points to 10,000 and beyond has happened quickly. No one can say for sure how it would move in the near term.

Whether a fresh correction would happen before or after the Budget is an issue that would lend itself to speculation. Holding a longer-term view of the market is more recommended at the moment.

Which sectors could be re-rated in the days ahead?

No, I do not think any major sector would come in for a big re-rating in the immediate future. It is true that a few areas - there has been a spurt in tea, for instance - have lately recorded advances. These could perhaps be seen as remote events.

However, my strong sense is that individual companies, with long-term business potential, could certainly gain from their profitability and earnings visibility. May be the Budget would provide some directions.

Isn't there a case for profit booking?

In a fair value plus sort of market, one would urge investors to remain tolerant before they consider pulling out altogether. Locking in money for a decent length of time, say, five or six years, could be actively thought about.

In fact, a professional fund manager would look forward to handling five-year money, as opposed to shorter-term mandates. In the former situation, there are no immediate redemption pressures to confront and liquidity issues to address.

Also, for all the changes that have taken place around us, certain growth drivers do exist in the economy. Increased infrastructure spending, new consumption patterns, HR strengths and the like remain important themes around which the growth story would continue to revolve. There is no point in staying away from this opportunity.

What can debt fund investors expect in 2006?

While these funds have generally fallen out of favour with one section of investors, returns from debt products would not be out of line with expectations. We have all seen how the interest rate scenario has changed in recent times. Investors should consider debt from an asset allocation point of view.

For an average participant, an overdose of equity in his portfolio may not be entirely useful, especially if he feels that the market would correct soon.

As for Pru ICICI MF, the market these days does not hear much about funds like Power, Discovery, Tech... Your comments.

These continue to remain in our fold as they were. Each has a specific investment objective to pursue. Returns from these schemes have ranged from 55 per cent to about 70 per cent in the past one year or so. Some of our more recent offers, such as Pru ICICI Emerging Star and schemes dedicated to infrastructure and services, have added to the suite of equity funds we already had.

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