The Hindu Business Line : `15-20 per cent returns are still achievable'

ALL through the bull run, DSP Merrill Lynch MF has sought to pursue a conscientious stock-selection strategy. So says Mr Anup Maheshwari, Head - Equities.

"We have attempted to pick the best of breed and benefit from the gains recorded by the stocks we have opted for," he notes. The MF has now proposed a new broadbased scheme, one which will concentrate on companies that benefit from economic reforms and development in infrastructure. Excerpts:

Isn't this time for some realistic expectations from equity funds?

It's true that stocks have advanced substantially over the past one year or so. Equity funds have tried to make the most of it and have generally performed well during this period.

However, I have no doubts that 15-20 per cent annualised returns are still achievable, the current valuations notwithstanding. For investors in equity funds, this does not imply bad news.

Quite obviously, fund management styles will be a major issue. The country stands at an interesting juncture, having reaped the benefits of economic liberalisation. Reforms have gathered speed in some of the most critical segments of the economy.

Given this situation, equity fund investors need not worry too much, especially if they can stay put for a decent span of time.

Are any new sectors coming up sharply?

Well, some of them are buzzing quite strongly. Take, for instance, sugar. It has thrown up companies like Balrampur Chini, which, incidentally, is now part of our holding. We are tracking its movements closely.

Telecom is another potential area. A player like Bharti Tele, which as you know has not been around for long, has certainly grown in size. We have invested in that as well. Textiles, too, is emerging and may well shape up into something more positive in future.

Elsewhere, there will be major prospects for industries that can use gas, the availability of which is set to increase in India. For such industries, cost of production can easily come down and the user community stands to benefit in the process.

Fund managers who need to allocate assets will find such developments very engaging.

The TIGER fund that you have proposed now will exclude a few sectors ...

Yes, areas like textiles and FMCG or even IT will not be in its universe. We will not invest in them as they do not meet the fund's direct requirement.

The latter originates from two distinct themes: Infrastructure growth and economic reforms. I must confess that a lot has been happening here; in fact, there could be more developments. Taken together, they presently constitute roughly 20 per cent of the market.

On the other hand, we will be able to spread our allocations over such promising sectors as power, telecom and banking. And then, there is a whole range of infrastructure-related companies — cement, engineering, auto and the like. PSUs will also be a big theme for the fund.

I should mention here that a few key trends have become important in this context.

Consider the changes in ownership of Government-controlled companies and the potential this can unleash for the stock market. Or vital changes in policies that lead to, say, new pricing strategies. Some of these trends have had serious ramifications already. Having said that, let me just add that the broad idea behind the TIGER fund is to choose a number of relevant investment ideas and assign enough weightage to each.

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`15-20 per cent returns are still achievable'