The Hindu Business Line : Steam still left in the stock market: UTI MF

Though the Sensex has topped the 14,000-level, there is still steam left in the stock market as not all stocks have participated in the rally which has been driven mostly by the large-cap stocks.

The UTI Mutual Fund, which has come out with two new schemes - UTI Long Term Advantage Fund and UTI Capital Protection Oriented Scheme -expects to collect in excess of Rs 1,500 crore through them.

Speaking to Business Line here , Mr R. Raja, Senior Vice- President, UTI Mutual Fund, Mumbai and Mr V. Srivatsa, Fund Manager, UTI MF, said the index has moved up in the past one year by almost 40 per cent and much of this was driven by the Sensex- heavyweights.

But the other indices such as the Midcap Index or BSE 200 or BSE 500 have lagged behind the Sensex by a wide margin. This showed that there was `still some value left in some good stocks' that has not been recognised by the market.

The market has focussed, especially in the last six months to one year, only on the top stocks. While the Sensex in absolute terms may look stretched at 14,000 level, there was a lot of value in many mid-cap stocks that the fund felt that it could capitalise upon. From a fund's perspective, there was `ample scope of giving returns better than the market'.

While it was true that most market analysts estimated that this year the returns might not exceed 12-15 per cent in view of the higher base, this year might throw up a lot of investment opportunities across many companies.

FMCG SECTOR

Asked about the relative under- performance of the FMCG sector in the current market rally, Mr Srivatsa said the market rally has been fuelled by select sectors such as IT and auto.

He felt that it would be catch up time for some of the sectors like FMCG. In earlier years, FMCG was one sector that was clocking 10-15 per cent annual growth and it was treated as a `defensive bet'.

But in the past 2-3 years, a lot of sectors have shown exciting growth prospects such as capital goods, IT and metals that were much higher than FMCG that also witnessed internal competition among companies.

REAL ESTATE STOCKS

On whether the real estate stocks have not peaked, he said the sector would grow since the `underlying demand drivers are in place'. But valuation was a critical issue and his belief was that it was `slightly over-priced' and felt that the disclosure norms for real estate companies required a `lot of improvement'.

Answering a question as to whether the mutual fund industry, whose total assets under management had swelled to about Rs 3,20,000 crore at the end of December 2006, could gainfully deploy this amount, Mr Raja said not all this amount has flowed to the equity funds. The corpus of equity funds would be about 30-35 per cent of the total collection.

He said the market cap was more than Rs 20 lakh crore and he did not see any constraint in handling the inflows into mutual funds. The FIIs had invested more than $60 billion in India. There was huge opportunity for investment in the domestic equity market. There are a lot of unlisted companies like those in the insurance sector.

INSURANCE COMPANIES

In the developed market, insurance companies account for about 10 per cent of the market cap. When insurance companies in India unlock their value, the listing could happen in India also.

It was the case with real estate sector too that played a pivotal role in the markets abroad and it could occur in India too.

Asked whether UTI MF was apprehensive of losing its numero uno position in the industry with Reliance MF closing the gap, Mr Raja said the UTI MF was retail oriented from the beginning and it has lot of schemes that are performing very well. With its existing schemes and NFOs, it would strive to mobilise the maximum possible and retain its position.

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