The Hindu Business Line : Citigroup sees more retail funds into MFs

The valuation of the Indian equity market is high and it is largely driven by momentum, said Mr Markus Rosgen, Managing Director, Equity Strategy, Citigroup.

"Investors clearly want a combination of valuation and momentum while investing," he said.

One positive factor for Indian companies is that they offer high Return On Equity, he said. Mr Rosgen was speaking about Citigroup's investment strategy as part of the India Investor Conference.

Asian countries such as Taiwan and Korea are suffering because of falling export prices, as they are heavily dependent on industrial manufacturing. However, India is safe from this worry because it is largely dependent on services.

On the dividend payout ratio India was low in the ranking with 26 per cent, followed by Korea with 22 per cent as against the ratio of 39 per cent for the Asian region.

"In India the dividend payout ratio is low because corporate capital expenditure is strong. In longer term, Indian payout ratio has ample scope to increase," Mr Rosgen said.

The total flow into the Indian equity market last year was over $100 billion, of which 20 per cent was from FIIs and 5 per cent from mutual funds. "Flows from domestic MFs in India will increase as the retail savings are highly under invested in equities. Less than 5 per cent of domestic household savings is in equity," he said.

About interest rates, Mr Rosgen said most Asian markets are likely to increase rates by 25-50 basis points. Interest rates are on the upward movement in countries such as Thailand, Taiwan and Hong Kong.

Investment plan

Mr Ratnesh Kumar, Director, Head of India Research said, Citigroup is positive on the prospect of economic growth of 7-8 per cent.

About Citigroup's investment strategy in India, he said, it is to be with large cap companies with visible growth stories and dividend distribution. "We would advise investors to go with sectors where there are tangible growth for people to see, for instance, subscribers growth in telecom," Mr Kumar said.

The group is overweight in banks, capital goods, information technology, services, telecom and utilities, he said.

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