The Hindu Business Line : ‘Profit-booking necessary if price targets are reached’

A fund manager’s job is to invest whatever he has, not to sit on cash, waiting forever for opportunities, argues Mr R. Rajagopal, CIO, DBS Cholamandalam Mutual Fund. Here, in this interview, he dwells on the latest trends in the market.

Do you recommend a quick exit? Should investors liquidate and stay in cash?

Let me just say that a fund manager needs to invest and remain true to this philosophy at the same time. However, profit booking becomes necessary if price targets are reached. If you think you have made enough money by staying invested for a reasonable period, you may well consider a pull-out. That has to be done on a case-by-case basis.

Without taking into account the general decline, where are you overweight at the moment?

Well, we have telecommunications and capital goods, which account for a critical part of our overall exposure. We have also allocated to certain oil & gas companies as well as PSU banks. There is real estate too to speak of. Many companies in these sectors have, in the post-crash scenario, more reasonable valuations. On the other side, we are underweight on select commodities, including sugar and paper. Our funds are neutral on metals. As for IT, we are somewhat neutral too.

Are there one or more sectors that are sending strong signals lately?

I can tell you about media stocks, which we have started looking at actively. This is a fairly recent development insofar as our funds are concerned. I think, selectively speaking of course, media will do reasonably well, thanks to media companies’ increasing reach, which should give them better revenues. Literacy rates are going up and TV viewership figures are on the rise. The number of listed companies in the sector is rising too, leading to more choices for investors who are planning to explore this arena thoroughly.

With so many close-end equity products coming, are open-end funds passé?

No, not really. Each has its utility, a clear-cut standing in the expanding universe of funds. It is true that we are seeing more close-end funds these days. In a way it allows fund houses to retain money for relatively longer periods. This is not to say that open-end funds are behind times. On the contrary, a number of these are doing well, being accepted by new investors. Many of the recent close-end funds are mid-cap oriented. Now, the mid-cap range has been redefined. The larger companies in the range have actually become very big. This poses a new challenge for fund managers.

How many stocks will the infrastructure fund hold?

We intend to have 30-40 stocks in the portfolio, not a major deviation from the average number we generally maintain. The idea is to ensure there is enough diversification in terms of spreading our assets over a range of sectors. At the same time, there are merits in concentration too. Let me remind you here that the Government’s commitment to finish large infrastructure projects and start new, ambitious ones is well appreciated. As you know, the term ‘infrastructure’ has come to include quite a wide assortment of sectors. For instance, sectors as diverse as banking and hospitality will also make it to the sub-set. Other typically service-sector companies may also be included in it.

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