The Hindu Business Line : `Investors prefer stable Govt at Centre'

KOTAK Mahindra Mutual Fund has lately reported a growth in the equity assets under its management. With the addition of Kotak Global India to its family of products, it now handles quite a few equity schemes, including a couple that are focused on multinationals and technology companies.

Mr Rushabh Sheth, Head - Equity Funds, maintains that the Kotak funds are constantly trying to examine the trends that are emerging in various sectors with a view to detect the right investment opportunities.

Excerpts from the interview:

How do you rate the market now that prices are down quite a bit from their highs?

The stock exchanges did see an extremely strong rally, recording almost 100 per cent gains during the past year. Most participants, therefore, expected some consolidation to happen in course of time.

Besides, a few other factors that had each played a role. There was, for instance, a flood of public offerings in the domestic market and a general downtrend on the global front. These caused further weakness in sentiments.

Having said that let me add that the underlying growth momentum in the economy continues to be quite strong. I have a feeling that corporates in this country should continue to report robust earnings even for fiscal 2005.

The market has corrected almost 15 per cent from its high in January and there could still be some more consolidation over the next couple of months. So this is an opportunity for investors who have at least a 12-month view on equities.

Do you foresee a change once the elections are over?

For reasons that are obvious to you, I would not like to make specific statements.

All I can suggest is that investors in India would prefer a stable government at the centre, one that can carry on with the process of economic reforms and provide the impetus necessary for the development of infrastructure.

And if that actually materialises, the market will take it in a very positive manner.

With regard to your main equity fund, are you overweight/underweight on any sector?

We are currently overweight on a few areas as far as Kotak 30 is concerned.

These include banking, engineering, oil & gas and pharmaceuticals.

At the end of February, we had over 13 per cent of the scheme's net assets in banking stocks. SBI, which accounted for 8.4 per cent, was the top holding in the portfolio. More than 16 per cent was kept in pharma.

Remember, we follow a bottom-up approach in our bid to select the right stocks.

The top 10 holdings would typically form approximately 60 per cent of the fund's portfolio.

We intend to continue with this kind of concentration. In recent weeks some of our key holdings have been Grasim, BHEL, Lupin and Maruti.

Any adjustments in the equity part of Kotak Income Plus?

Here we intend to maintain only a moderate exposure to equities, which presently constitute about 11 per cent of the assets.

We wish to raise this over the next one month or so. The top holdings here are leading names like SBI, Bhel, Infosys, ITC and HPCL.

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