The Hindu Business Line : `It is the responsibility of professional fund managers to spot these companies early'

Betting on infrastructure
More allocations to key areas of infrastructure will create demand in so many new ways. And I am not taking about building roads, ports and power projects alone.

Kolkata , Feb. 26

Spending on infrastructure, if it picks up, can make a huge difference to the Indian economy. And this will have an impact on stocks that represent some of the major sectors, feels Mr Mahesh Patil, Senior Fund Manager, Birla Mutual Fund.

Excerpts:

So many stocks are soaring, often beating logic. Does that make you nervous?

The key is to locate stocks that still have an upside, irrespective of current prices. While this does turn the stock-selection process into a real challenge, I believe it is not impossible to identify good companies with business growth potential and clear earnings visibility.

It is the responsibility of professional fund managers to spot these companies early. The sooner they do it, the better it is for investors.

But clients' expectations are still running high... Right. But a section of the client community, thanks to the upsurge we have lately seen in the stock market, would have come closer to their profit targets by this time.

Many investors have now become aware of the fact that superlative returns will not necessarily materialise year after year.

If you consider equity funds, clients have by and large made money if they had stayed invested for sufficiently long periods.

Have Q3 results disappointed you somewhat?

No. The point is corporate performance has come as a pleasant surprise to the market for many quarters running.

It is possible that some quarters had taken this for granted. But we will have to see how companies close the current fiscal at the end of Q4 and whether the growth momentum is sustained as we step into the next financial year.

What can higher spending on infrastructure do to stocks?

Well, it will spur economic growth - a phenomenon that will definitely have a positive spin-off.

More allocations to key areas of infrastructure will create demand in so many new ways. And I am not talking about building roads, ports and power projects alone.

Take, for instance, segments like tourism and hospitality, and more specifically hotel companies.

These will gain from increase in tourist traffic volumes. In fact, India's pace of growth will quicken if we have the right infrastructure in place.

Does your latest offer cover too wide an area?

Not really, if you consider the pervasive nature of infrastructure.

We will try to evaluate stocks from a range of sectors - and not necessarily such obvious ones as steel, cement or construction. `Infrastructure', in a sense, is a rather large canvas and the fund will aim at capital appreciation from a portfolio of well-chosen companies.

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