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Nilanjan Dey

Long-term edge has not been blunted: Franklin Templeton MF

Kolkata , June 20

Near-term volatility is far from ended, given that the Indian stock market is faced with risks ranging from adverse global factors to domestic issues that are playing the spoilsport. Or so feel fund managers, chastised by the current corrective phase that began early May.

Equity funds, which have on an average seen a negative 13-14 per cent in the past month, will have to cope with significant uncertainty looming ahead, indicate fund houses. International investors, some add, need to get a better idea of the way the domestic scenario is shaping up before committing more to Indian stocks.

Fund managers are only too aware that valuations are dropping quickly — a trend that has prompted a section among them to dub these as "relatively attractive".

In this category is HDFC MF, which has pointed out that the Sensex is currently trading at around 16 times the estimated one-year forward earnings. "This indicates a moderate outlook for markets over the medium to long term," it has stated, adding that investors need to allocate with a "minimum view of two years and be tolerant to volatility".

US rates

The Sensex also features in Sundaram MF's account of the situation. The fund house, which feels that the mist may partially clear by June-end, believes that the near-term may witness volatility until the global markets get a clue on the direction of US interest rates.

SBI MF too has warned investors about near-term risks. "It may be difficult to make substantial gains by trying to time the market in the short term," it has said even as it has reiterated a rather common view: Indian equities are now attractive for long-term investors.

Indian stocks, according to HSBC MF, are more fairly valued at this juncture. It has anticipated "a GDP growth of 7.5-8 per cent in FY 2006-07 on the back of higher growth expectations in industry and services".

Long-term outlook

India's long-term edge has not been blunted, Franklin Templeton MF has suggested, while pointing out that benefits will be derived from factors like demographics, services sector growth, a narrowing of current account deficit with increased internal production of gas etc. "It would be good if corporate India starts to buy back shares and increase dividends, keeping in mind the interests of shareholder value and the attractive valuations," FT has noted.

A similar sentiment has been expressed by Principal MF, which too maintained that the long-term outlook remained intact. "We could witness a similar bounce back after the current bout of selling," the MF has said while referring to the fact that the MSCI Emerging Markets Index had plummeted in May last year and had resurfaced subsequently.

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