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| Q&A: A Balasubramanian, CEO, Birla Sun Life Mutual Fund | | 'Investors can gain from accelerated SIPs' |
| Tinesh Bhasin / Mumbai Jul 28, 2010, 00:10 IST |
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A Balasubramanian, CEO, Birla Sun Life Mutual Fund, tells Tinesh Bhasin that retail investors will be better off if they stick to basics. Edited excerpts:
The BSE Sensex has remained above the 18,000 levels for the past one week. What strategy should investors adopt at current valuations?
Investors have no reason to worry, as the medium-to-long term outlook for the stock market remains positive. An underlying recovery in the economy and improvement in government finances due to telecom auctions and disinvestment plans are supporting the stock market. The interest rate scenario is tolerable and companies have shown strong earnings momentum. In addition, the domestic demand has been healthy. With a better monsoon this year, the broader outlook for markets remains positive.
Given the existing ‘feel good’ factor in the stock markets, is this a good time to get into equities, or should one book profits?
We believe timing the market is impossible. We suggest investors to enter the markets with a two-three year perspective, as the medium- to long-term outlook is good. This may sound clichéd, but a mistake investors repeat is deferring investments in a rising market, as they wait for a correction. Similarly, in a falling market, they wait for a positive momentum.
Those worried about the market direction in the short run can go for big-ticket systematic investment plans (SIPs), rather than investing a lump sum amount. Say, if an investor has Rs 10 lakh, he should put the entire money in a liquid fund initially. Then, opt for a weekly or fortnightly SIP of Rs 10,000-20,000. This is called an accelerated SIP. This way, he deploys the money in less than six months and profits from averaging his cost of purchase.
Considering the rising interest rate scenario, what type of funds will you recommend in debt investments?
The investor should choose funds that have actively managed their portfolios, as this will drive returns in future. For less than a 12-month period, shorter-duration funds work out well. These include liquid, liquid-plus and floating rate funds. If the money needs to be invested for more than a year, it makes sense to opt for income funds.
With a short-to-medium term perspective, which sectors look the most attractive?
The banking and financial sectors hold promise, as they grow with the economy. These sectors will continue to clock a growth rate of 15 per cent in deposits and 17-18 per cent in credit.
With a good monsoon this year, the rural areas may see a rise in demand for two-wheelers. So, the automobile and auto ancillary sectors may also prove to be good bets. The auto industry is expected to grow 13-14 per cent this year.
Other sectors that seem attractive are capital goods, as the private sector is expanding, and the domestic pharma companies, since governments across the globe are focusing on healthcare costs.
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