The Hindu Business Line : Fund managers betting on stock-specific action in 2007

If the very idea of thinking about mutual funds on Christmas Day makes you squirm, steel your nerves. This is perhaps the best time for you to sum up the performance of your favourite funds during the year that is going by.

And as you step into 2007, this is indisputably the most appropriate time to think of the things that you may want to do to your portfolio.

2006: Good show

The last 12 months were indeed seminal for the asset management industry: Funds under management swelled, a great variety of new funds were introduced, equity funds in particular did quite well and debt funds did not disappoint either. Wealth was evidently being created.

In other words, most investors were content even as fund managers earned their bonuses in style.

That list of good things could have gone on and on, but there is one factor - it raised its ugly head yet again in the last couple of weeks before the close of 2006 - that prompts us to cut it short and focus on something that is currently very close to everybody's heart.

You have probably guessed it right: volatility.

Volatility of an extreme kind has lately rocked the market, a trend reflected in ruthless ups and down in the indices.

NAVs have been impacted and many investors have started saying aloud that this is probably not the right time to make fresh allocations.

In fact, a section of them is said to be pulling out, at least in bits and pieces.

Distributors too indicate that many of their clients are keen to book profits at this stage.

In fact, no one can blame them for harbouring such a thought, not when people get scared easily by all the rapid-fire ups and downs that have been taking place.

Stock-specific

How will things look in the New Year? Well, an influential section is already talking seriously about the relative significance of stock-specific action (as opposed to focusing on entire sectors).

Other things remaining constant, there will still be enough scope of choosing winning stocks, it is being suggested.

This theory actually transcends market-cap barriers. To put it a bit more bluntly, potential multi-baggers may well emerge from the rank and file - it does not matter whether they are large-cap or small-cap.

And what could be the most compelling issues for fund managers in 2007 and beyond?

We sifted through piles of communication from them to arrive at a few key themes.

Here goes a list of select issues - broadly listed under economy, corporate and market - which fund managers want you to appreciate:

Economy: Sustenance of the GDP growth rate, the extent of government spending on infrastructure, inflationary pressures, creation of fresh demand, direction of interest rates, monetary measures introduced by RBI, rise in bank credit, state of the rupee, impact of international crude price movements.

Corporate: Visibility of earnings growth of domestic companies; impact of increase in raw material/input costs, effect on increase in salaries, sustenance of operating profit margins, level of exports driven by the corporate sector's cost competitiveness.

Market: Continuation of inflows from overseas investors, extent of involvement of domestic institutional investors, the arrival of primary market issues, goings-on in sectors that did not really participate in the recent rally, performance of small- and mid-cap stocks vis-à-vis their more active large-cap counterparts.

Feedback may be sent to nilanjan@thehindu.co.in

More Stories on : Mutual Funds | Outlook | Mutual Confidence

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

Stories in this Section
Why global cos are keen on Hutch Essar

`To get best benefits to passengers, the key is efficiency'

Fund managers betting on stock-specific action in 2007

Govt committed to growth, viability of public sector: PM

BPCL to sharpen focus on `Beyond LPG' service

There Is Always An Alternative

Dwarikesh Sugar looking to acquire `large company'

Passenger car market on a roll in 2006

Facility management sees rapid growth

Satyam's global expansion in sync with local needs

Gold may remain muted in short term

Cumin seed exports may cross 25,000 t

Holiday mood may keep market range-bound

Banks' deposit mobilisation catches up with credit offtake