The Hindu Business Line : `Bout of ups and downs is one more lesson for investors'

If you think you know all about volatility in the stock market, think again. That is, in essence, the message sent out by Mr R. Rajagopal, Head - Equities, DBS Cholamandalam MF.

"The latest bout of ups and downs is one more lesson for investors", he said, adding that it was never too late to exercise caution, especially when conditions are so inconsistent.

Lately, the market has been far too unstable for the investors' comfort. What is your reading?

Yes, there has never been a dull moment. One will have to find why the market has behaved like this and analyse the reasons. It is not that the key economic indicators have changed overnight in a dramatic way.

Global cues have also not come very differently this time. However, the Indian market is not detached from international trends. Some of these have had a local impact too. Overall, we feel uncertainties cannot be wished away and investors will have to keep on doing what they have to in order to achieve their goals.

What sort of allocations do you have now?

We have tried to be as broad-based as possible, depending on the mandate we have for a particular fund. The idea is to select the best stocks from a range of sectors. We have about half a dozen equity products to offer. The fund house is currently overweight on telecom, IT, capital goods and cement.

Also, we are underweight in areas like sugar and real estate. However, in both sectors, valuations have come off quite a bit.

We will have to see whether these are now turning attractive enough for us to consider an entry.

How would your latest offer allocate assets?

The fund in question will invest mainly in stocks on which options are traded on the exchanges. The idea is to have a diversified and hedged basket of holdings. There will be no style bias. Stock selection will be done with a view to optimise expected returns and minimise volatility.

The hedging strategy we intend to follow will ensure that when the market drops, the portfolio will decline much lower than the market. There will be long position in equities and long and short position in derivatives.

How do you view the mid-cap segment at this juncture?

We do foresee considerable opportunities arising in this space. The point that many people have made is that mid-cap stocks have been very unpredictable. And this is not incorrect.

What is also correct is that a number of these stocks have, at various times in the past, swelled in terms of capitalisation. Therefore, a section of them moved away from this category and assumed a large-cap orientation.

At the same time, some stocks that were formerly small-cap came up to occupy more important positions. Let me tell you here that like other funds, mid-cap products too must be true to label.

Are you lining up other offers?

Yes, we are interested in doing a capital protection oriented fund. Also, a small cap fund may be in the works. DBS, our partner, has displayed its investment management abilities in other markets. It has to be seen how best we can make use of this.

A few of the other players are toying with the idea of investing in overseas securities, taking advantage of the recent changes introduced by the regulator.

We think this can be a good idea for Indian investors who are looking at having an international element in their portfolios.

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