The Hindu Business Line : `Infrastructure sector looks promising'

MR K.N. SIVA SUBRAMANIAN, Senior Vice-President and Portfolio Manager, Franklin Templeton, is currently busy presenting the fund's latest offering, a broad based equity product ingeniously billed Flexi Cap.

Mr Subramanian, who had entered the FT fold when it took over the erstwhile Kothari Pioneer and is now one of its most visible faces, talks about his recent investment strategy and more. "Periods of outperformance can not go on without interruptions. They are characteristically followed by a phase of consolidation", he told Business Line.

Excerpts:

Which are the sectors that you think are particularly promising?

Let me talk about just one area, infrastructure. I see major milestones that are to be crossed on this front. A lot has been happening in segments like power and telecom in recent days. The trend is expected to continue.

Agreed, substantial resources will have to be committed, but that will have to be done keeping in view the requirements of a growing economy.

Infrastructure, after all, is a very broad concept and covers so many aspects.

How do you see the December results unfolding?

The third quarter numbers suggest that corporate profits have kept pace with growth. On the whole, balance sheet sizes are increasing and many companies are witnessing an improvement in profitability.

One important issue, however, relates to correction in the market. Corrective phases - we are passing through one right now - are usually seen to be healthy. This is particularly important in the present context, as the market had been running a bit ahead of fundamentals.

Whether this will continue or whether there is actually a reversal waiting for us at the end are things on which I do not wish to speculate.

The proposed Franklin India Flexi Cap seems to be a normal, diversified equity scheme...

True, but we are positioning it as a fund that will invest in stocks across the whole market cap spectrum.

In that sense, it is different from, say, Franklin India Bluechip, whose investment objective is to simply achieve consistent growth by focusing on good, large-size companies. Or from Templeton India Growth Fund, which is a firm believer in the theory of value investing.

In the case of Flexi Cap, the plan is to follow a bottom-up stock selection process, at the end of which investors will have one more choice before them. We have stuck to a disciplined approach in good times and bad, and the same strategy will be adopted in this case as well.

As I see it, Flexi Cap will take a decent exposure to mid-cap stocks even as it makes some serious investment in established, large-cap names.

Will Indian investors ever back passively-managed funds in sufficient numbers?

Well, the case for active management is very strong here. The average person in this country actually fetes actively-managed products and wants them to outperform their benchmark indices every time. In comparison, index funds have not really caught the market's attention.

On the other hand, fund managers like us are trying hard to ensure that investors benefit from the performance put up by corporate India in the best possible manner.

However, it is also true that Indians generally do not allocate much to equities, as many people cannot stomach the volatility that the stock market throws up so very often.

In fact, this issue is raised every now and then by market pundits.

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