While investors across the globe are getting rattled by the intense volatility, some of the Indian fund houses are delivering good returns in certain schemes.

Speaking to Bloomberg TV India, Sundaram Mutual Fund CEO Sunil Subramaniam said the Indian growth story will get reflected in stocks with better earnings and P/E ratios.

Take us through what Sundaram is offering on the new fund…

Basically, we have got approval from SEBI for a value fund. Value stocks are those which are currently quoting at what the long-term valuation should be and hence if you buy them and hold them, there is a good chance of an upside. Given the current fluctuation in the market, where international oil prices are collapsing, commodities are on a downtrend, US interest rates are getting hiked and China is not reporting good numbers, it is the time for India to be the fastest growing nation in the world. But stocks are getting impacted due to global news and liquidity flows.

This is not a sustainable phenomenon. Over the long run, the Indian growth should reflect in Indian stocks with better earnings and better P/E ratios. So, this is a good time to pick up good quality stocks, which are linked to the Indian economy and can deliver multi-bagger returns over a five-year period. So that is why we have launched this fund and we are getting good response from retail investors seeking to lock in their funds.

What are the kinds of question at this point that the investors have asked you?

I think one concern is the fact that there is some inaction from the government — from the expectations that the Modi government had come with. So people are saying — is that hype their crown reality? The second question is that there is a lot of news about the fact that the mid-caps have delivered the best returns over the last two years but if today you see the mid-cap index, it is slightly higher than the Nifty. So some of those people who have been consistently investing in mid-cap stocks are now asking us — has the run-up been too much, is it time to book profits and should we move into that?

So these are the two primary things that are in the investors’ minds. And the answers to them have been on the lines that fundamentally the Modi government has been doing a lot of non-urgent important stuff whereas the markets and corporate are in need of urgent action. But what they (the Centre) are doing fundamentally — foreign visits, tying up the FDI, focusing on roads and infrastructure — I think those are very good things from the government’s perspective. Also, India has been a huge beneficiary of the commodity price drop and the oil price drop. Out of the BRICS countries, the rest of the countries are nowhere there. So I think the fundamental confidence on India should remain and we are reassuring them that India remains a good growth economy and they should invest in it.

On the mid-cap, what we tell them is…for example the BSE midcap index they are going by…40 per cent of that is large caps. Whereas if you actually take a fund construct — as you know Sundaram Select Midcap Fund is our top performing long-term fund and Sundaram SMILE is a good fund — the midcap index P/E ratio is about 16 a year forward and Nifty is around 14.5-15. So that is the reason these questions come. But if you take a mid-cap fund for example, the average P/E ratio of the stocks that we have picked is hovering around 13.

In our individual analysis and forecast, their earnings growth should be upwards with 25 per cent per annum in the next two years on a CAGR. It is all about stock picking with the mid-cap and small-cap. Don’t go with the headline — that is what we are telling people.

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