'The retail momentum is catching on'

Q&A: Ved Prakash Chaturvedi, Managing Director, Tata Mutual Fund

Tata Mutual Fund Managing Director Ved Prakash Chaturvedi thinks investor confidence is slowly returning, though large investors are adopting a wait-and-watch strategy. Chaturvedi, who is bullish on information technology and auto sectors, spoke to Swarup Chakraborty on market outlook and participation of retail investors in mutual funds. Excerpts:

How do you see the recent correction in equity markets?
Some issues that the world faced recently like the liquidity crunch, non-availability of credit and low investor confidence are real issues and will recede gradually. Sometimes, stock markets expect the recovery to be dramatic. Therefore, in the last six months, we saw that the rise in valuations and prices was steep and very sharp. So, after a period of euphoria and high returns, there is some correction, which is less than 10 per cent. It was expected as markets do not move in a straight line.

The third-quarter numbers were not bad, yet the Sensex went down by nearly 1,000 points in January. Why?
Stock markets do not react to individual events. They had already factored in an improvement in third-quarter numbers. The rollback that you see is a reflection of what happened worldwide. What happens globally will continue to affect our markets and therefore we will have to moderate expectations based on what is happening worldwide.

Is it the right time to enter equity markets?
The Indian equity markets will be among the most lucrative ones for the next 5-10 years. Though the period will be marked by volatility, as we have seen in the past, there is a gradual return of investor confidence.

How do you see the markets panning out over the next quarter? Which are the sectors you are bullish on?
The markets will be volatile over the next three months and analysts and investors will take cues from the Budget and inflation trends.

For now, analysts and large investors are adopting a wait-and-watch approach. We are bullish on IT, capital goods, construction, auto, auto ancillary, and consumption-driven industries, and cautious on oil & gas and real estate.

Which factors will affect the markets the most over the next two months?
The fourth quarter results of companies and the outlook given by companies for the next financial year will be watched carefully. I am positive about economic growth in the next two quarters.

What is your view on positive inflows into equity funds in January?
There has been a return of business and consumer confidence and an improvement in the outlook of global investors towards India. However, this is happening gradually. From the perspective of growth, the index of industrial production numbers are gradually improving. This is the first phase of return of investor confidence. January and February figures reveal the retail momentum is catching on.

In January, high net worth individuals invested in equity funds while smaller players stayed away. Why?
The participation by investors went up in January and a majority of them were big investors, or rather better-informed investors. However, retail participation in mutual funds is gradually increasing.