The Hindu Business Line : JM Mutual `quite confident' about tech, auto sectors

Kolkata March 18 Mr Sandip Sabharwal, CIO (Equity), JM MF, is sure that the market will be neutral to negative in the immediate term. He is also quite sanguine that it will shortly start attracting quality money. "May be, this will be sooner than what many people think. Growth indicators are far too strong to discourage serious investors for long," he said. Here, he answers a clutch of questions.

What are the sectors you wish to avoid at this stage?

Opportunities can appear anywhere and no sector can be a complete no-no for those who are scouting for the best prospects. That said, there will be some areas where we need to tread carefully. Take, for instance, commodities. Prices have peaked for many commodities and there may be some corrective action. The next two or three years will be very critical for a number of these and supply scenarios will be watched carefully during this period.

Conversely, where will you invest without much hesitation?

Let's just talk about technology, automobiles and capital goods. We are quite confident about all of them. A number of positive developments are awaited in each. If these do play out well, quality companies operating in these areas may see decent growth. Our allocations will in the days ahead reflect the kind of views we have started forming about them.

How do you view real estate stocks, which have been criticised for their inconsistency?

After a longish bout of progress, the decline in real estate has been quite marked. However, it is not that this sector deserves to be wholly ignored. As things stand, we do see some pockets of value. You need to bear in mind the fact that the correction in real estate prices has caught some sections unawares. And this should discourage investors to just blindly get into one or more sector, without considering the possible adverse impact of such a move.

Now that the market is off its high, do sector funds merit attention at all?

That depends on an investor's risk-profile. These funds are not broadbased and must remain dedicated to a small domain. JM MF has some sectoral products in its stable. Each is driven by a specific mandate and is run true to label. Let me tell you that we have done some restructuring in funds like JM Basic, which was at one point dedicated to the petro sector. It is now more diversified.

How will your small- and mid-cap fund pick stocks?

We have planned to have about 45-50 stocks in the portfolio. Roughly 20 of these may be small-cap. The trick is to capture candidates that are ready to surge ahead. What needs to be remembered is that while small-caps are often under-owned by investors, some of them are perfectly capable of being re-rated. A number of fund houses have in the recent past worked out small- and mid-cap products, counting on the market's liking for locating stocks that have gone undetected in this space.

Won't this in some ways duplicate efforts of JM Emerging Leaders?

Not really, the mandate is different. Broadly speaking, this fund identifies businesses that operate in up-and-coming sectors or those that display leadership potential. We have had some recast in its portfolio, bringing down the number of stocks to a little over 20. Now the plan is to capture their growth.

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