The Hindu Business Line : `Markets corrected sharply on issues other than results'

Mr Prateek Agarwal, Head - Equities, ABN AMRO MF, feels value-picking and patience would be rewarded in the days ahead. This, when momentum investing is not paying any longer. He also dwells on a few basic issues. Excerpts.

In a market that has come off markedly since its early May high, how are your equity funds poised?

To put it in general terms, the equity funds in ABN AMRO MF's stable have been overweight in sectors where earnings visibility is strong and where the business return on equity is higher than the growth being registered in those sectors. We are underweight in banking at the moment. Our funds have about 5 per cent investment in cash.

Should you ask clients to stay invested till the worst blows over?

We believe that investors should be in the equity markets only to the extent of their cash surpluses. Although the markets are volatile at the moment, they are fairly valued. We believe that investors who have the right kind of risk appetite should remain committed over the long-term.

What challenges do you expect equity fund managers to face in the coming months?

From a market, which was compensating momentum investing till recently, I guess we are graduating to a market where value picking and patience would be rewarded.

With central banks tightening monetary policy in unison, it is likely that global growth expectations would begin to slow down. In fact, that should temper commodity prices along the way.

However, this could impact different commodities differently, a trend that may well throw up a challenge or two. One would have to stay focused on the current account deficits, which may widen as a result of commodity movements. Remember, till we have that, we cannot de-link our monetary policy from that of the world.

Despite fairly decent quarterly results so far, the market seems to have factored them. Do you agree?

I tend to agree that quarterly results for the software and cement sectors have came ahead of expectations. However, the numbers for autos were below expectations. We do not believe that these have been factored in by the market, especially so given the sustainability of numbers as indicated by country's corporate chieftains.

That said, let me tell you that the markets have corrected sharply on issues other than results. To some extent there has been a sell-off, which was driven by shrinking liquidity. This came as a consequence of higher risk premiums being attached to emerging markets in general. The fact that the rupee has depreciated sharply has further eroded dollar gains. On the positive side, we believe that the growth story for India is intact and that the valuations are attractive. There are indications that the monetary tightening cycle, at least in some parts of the world, would slacken. This should help sustain valuations.

More Stories on : Interview | Stock Markets

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Principal prefers separate co for pensions foray

E*Trade Fin takes controlling stake in IL&FS Investsmart

DSP Merrill moots small, mid-cap fund

Ban on exports weakens sugar counters

Clutch Auto: Betting on growth

Kotak Bank in volatile zone

Bulls prevail

Global support pushes markets up

Funds of Funds lose assets in a tepid MF market

`Markets corrected sharply on issues other than results'

Cement, bank stocks help Sensex move northwards

Cairn Energy to float IPO by March