The Hindu Business Line : We see merit in having broad-based portfolios: DSP Merrill

Investors may have, quite justifiably, felt a little uncomfortable in a market that many thought was advancing far too rapidly, argues Mr Anup Maheshwari, Executive Vice-President and Head of Corporate Strategy, DSP Merrill Lynch Fund Managers.

“In a situation such as this, you should look at maintaining a well-diversified portfolio. Even if parts of it decline sharply, some of the other parts may help sustain your overall returns”, he says.

Excerpts.

Are you fully invested at this point?

More or less… our funds have been fully invested, with cash maintained at normal levels.

We have in the past not felt the need to keep more cash than what is necessary. As for the actual holdings, we see merit in having broad-based portfolios, with stocks chosen from a wide range of sectors.

Our equity funds have reflected this strategy.

However, let me add that some sections in the investment fraternity, having seen a decent increase in valuations, seemed to be keen on booking profits.

In which sectors are you overweight? Where are you underweight?

Well, to name a few sectors, we have been overweight on banks, especially private-sector banks, and capital goods. The latter, we feel, will do well, certainly so over the next two or three years.

Also, we have felt strongly about metals and media.

In media, we have been able to spot a few good names fairly early. As for being underweight, we have been consciously low on certain segments in the oil & gas domain.

Auto too should be mentioned in this context.

Also, we are being very selective about tech stocks at this juncture.

Which do you think will be the emerging sectors?

Let me tell you particularly about power and power equipment, an area that I think may well get a lot of attention in the days ahead. For some of the players – like those in the transmission towers business – the order book situation seems to be quite good.

On another front, some industries that feed oil & gas companies may also be kept in mind.

These may, for instance, include companies that lay pipelines or rigs.

Where does the real estate sector fit in your scheme of things?

You will agree that real estate has thrown up considerable opportunities in the recent past.

A lot of money has been chasing the sector and certain quarters feel that some of the real estate stocks are a little too highly priced. We may be looking at paring some of our exposure to this area.

In terms of index movements, what can possibly change the trend further?

Let’s mention global factors, some of which have a huge relevance for India. Global liquidity issues will keep our market busy in one way or other.

Investors are keenly watching the rupee. Mind you, the central bank, which has seen the way the currency has appreciated, has intervened recently to stem the trend.

The extent of inflows from abroad will also be a key indicator for local investors.

What sort of strategies will work in this situation?

Diversification is vital. Investors need to appreciate this simple thing. It is also important to choose the right asset options.

With so many different alternatives before them, choice often becomes difficult.

Diversification across asset classes is a good habit, one that should be practised by investors.

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