The Hindu Business Line : `There are going to be many out-of-ordinary situations that will provide opportunities'

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Kolkata Feb. 18 Look at fundamentals, go with growth. That is the essence of the strategy that Mr Mihir Vora, Senior V-P, Head of Fund Management - Equities, HSBC MF, would like to follow in the days ahead.

Here, he dwells on a few critical issues - the market's immediate reaction to giant overseas M&As, emerging challenges for stock-pickers and expectations from corporates.

Excerpts.

The market is discounting large M&A deals done abroad. How do you see this?

It is clear that local companies are increasingly feeling confident to acquire businesses outside India. This has become quite a phenomenon in recent times, especially so in the last few weeks. Yet some sections seem to be taking a short-term view of this, evident from the kind of reactions that have come immediately after the deals have been struck.

Typically, factors like integration issues are being cited. While such themes may well be relevant in the short term, the longer term impact of the acquisitions has to be considered as well.

How is the corporate scenario panning out within the country?

With 8-9 per cent growth rates in the economy, you may expect plenty of corporate activity. The market is looking forward to lots of news on this count. As we have pointed out in our latest initiative, there are going to be many out-of-ordinary situations, which will lead to opportunities for those tracking the corporate sector.

I must add here that the dynamics of a few sectors will undergo drastic changes. Retail, just to cite one, is expected to become a bigger segment in the days to come.

But won't stock-picking be much more difficult?

The sensible player will have to find discerning cases where considerable value can be unlocked. There may be a very special and unique reason, leading to higher growth prospects. This has happened time and again in the past. Take, for instance, cases where value has been unlocked because a company had a lot of first-class but surplus land with it.

Bombay Dyeing is a case in point. Or take instances where introduction of a new law has changed equations. Such legislations, for example, have made a difference to sectors like banking and power. I am talking about Sarfaesi and the Electricity Act.

Is the average investor warming up to these developments?

With all sorts of changes taking place in the capital market, the common man knows that he has to work relentlessly to spur his investments for greater growth. Mind you, this is not about value investing alone. One will still need triggers that will galvanise prompt action. If he cannot do these things on his own, he should take the help of experts. It needs to be seen whether the average participant understands this idea.

How are your own funds poised at this stage?

HSBC MF's equity funds have tried to take exposure to a range of sectors, keeping in view basic needs like diversification. We have a fair allocation to areas like infrastructure, engineering, capital goods and cement. We have felt strongly about large-cap IT and auto. There is now a decent exposure to media as well.

Let me mention that we have wanted to stay underinvested in FMCG and sugar. In a few other cases, including banking, where some profit booking has been done, we do not intend to take a conservative stance for far too long.

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