Apoorva Shah, Executive Vice-President and Fund Manager — Equities, DSP BlackRock Investment Managers, expects Indian markets to head higher in next one year time.

Excerpts from interview:

Do you expect the money to flow back into emerging economies?

Right now, a higher proportion of money is moving into the developed markets because they have seen a revival from a low base whereas emerging markets are seeing some challenges. So there is some amount of outflow that we are seeing . But if you take a one year view then we are going to see inflows.

Mutual funds and insurance companies have seen redemptions. What are the reasons?

Money has gone to physical assets in property and gold as it was chasing returns. Now, as the returns flatten out, money can come back to financial savings. There also has been high inflation in the past so to some extent, inflation eats away the savings.

I don’t expect it to continue as a lot of redemptions have happened. The main factors for redemptions have been the attraction for gold, property and more consumption.

Your expectation on the earnings?

I think the earnings will surprise negatively this time because there has been sharp spending cut by the government and also there have been consistent price hikes across the power sector and consistent price hikes in railway, petrol and diesel has been passed on.

Last one year much of the market rally has been on the premise that the economy has bottomed out. Do you think we have hit the bottom?

We have had a unique phase where our monetary cycle and the fiscal cycle have tended to lead and lag. They (RBI) started tightening monetary when fiscal was still loose, now monetary is loosening but fiscal is tightening. So I think it is not synchronised and the bottoming process is taking longer.

Do you see interest is moving to defensive sectors right now?

It is tactical right now. I would not say its medium term. One thing is for sure, the consumption sector has taken a beating but if the Government spending on rural and healthcare takes place as planned in the Budget then the rural consumer should be back on his feet and that should be attracting be investors in defensive sectors.

What is your outlook on the mutual fund industry?

Going by the expectation that financial savings will go up and physical savings will go down and GDP will revive, the outlook for the industry in the new fiscal is better than the last year. We should have more money coming into our income and equity funds.

Any plans to launch a new fund?

We are planning to launch a fund in the alternative investment space which has now opened up.

>manisha.jha@thehindu.com

>deepa.nair@thehindu.co.in

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