The Hindu Business Line : Recent new schemes evoke strong retail response: DBS Cholamandalam

Kolkata June 24 The large collections being recorded generally by new fund offers, including some closed-ended products, are an indicator that retail investors are in the thick of things, feels Mr R Rajagopal, Head Equity, DBS Cholamandalam MF. He also discusses a few specific sectors, indicating that auto may see a re-rating soon. But that may not happen to sugar, he said in exclusive interview to Business Line.

Excerpts:

There seems to be limited retail participation in the equity market at the moment. Most retail investors appear to stay away. Do you agree?

Let me answer this question by referring to the collections that mutual funds have been recording lately. More specifically, the last two months have seen the domestic funds industry raise substantial amounts of money. I am even referring to collections made by closed-end schemes, a number of which have come to the market. There is no doubt that much of this - a large part of it, in fact - is on account of retail subscriptions. This, therefore, leaves little doubt that retail participation in the equity market is quite robust.

The current year may see equities come off their highs considerably and fixed income may play a bigger role in investors' asset allocations. Is that a likely scenario?

There can be a classical way of tackling this issue, that is, by underling the importance of both equity and debt. In my opinion both asset classes need to be part of any investor's portfolio. Now, the manner in which you should allocate your surplus between equity and debt products is for only you to decide.

Clearly, the proportion will depend on your age/risk profile and the needs that you think will have to be met in future. I believe investors need to consider such factors while shaping their asset allocation for the longer term.

In other words, there is no reason to be driven by short-term views, including those on interest rate movements and volatility in the equity market.

In which sectors are you now overweight/underweight at this juncture? Do you expect a re-rating in any sector soon?

Well, as we see it, the telecom and banking sectors in India offer tremendous potential for growth. These truly reflect the changes in the country's demographic profile, increasing disposable incomes and the associated demand for product and services. Apart from these two, the other obvious area is infrastructure. The latter encompasses capital goods, construction, oil exploration and much more. Further, the media sector is growing, offering marked growth prospects.

As for possible re-ratings, yes, in the immediate future, the auto sector may see a reversal of sorts. This has been seeing some inventory corrections in recent times. Sugar has also been somewhat floundering.

But that, we believe, may take a little longer to change as far as the prices are concerned. However, they do offer a value investor a very good asset play. In fact, one could see some M&A activities, which may spur valuations.

Is this a time for selective profit-booking, may be, for fresh entry when valuations are softer?

From a portfolio manager's perspective, let me just say that opportunities always exist in the market place. I believe an investor should come through the mutual fund route and leave the stock-picking bit to the portfolio manager. This is job for professionals. In that way, he or she could remain anchored to the equity market without bothering about timing or volatility.

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