Investing: Paras Adenwala

With the interest rate cycle peaking, which debt mutual fund categories would be good to invest? I want to invest Rs 60,000 for two-three years.
Income and gilt funds tend to do better when the interest rate cycle is about to reverse. However, the high current account deficit could impact the sentiment in the bond markets. With your investment horizon, it would be a good idea to lock Rs 40,000 in high yielding fixed maturity plans for two-three years. The rest could be played with the interest rate cycle, by investing in income/dynamic bond funds.

In current market conditions, is it advisable to invest in defensive categories like fast moving consumer goods and pharmaceuticals? Are the valuations attractive?
The valuations in both are expensive, relative to the market, though the fundamentals are better, compared to other sectors. Wait for a correction to invest in these sectors.

I had invested in a power sector mutual fund (MF) scheme at the time of its new fund offering three years ago. It has not been doing well for two years. Should I redeem my units or stay put?
The power sector is battered by high interest rates, fuel-linkage issues, the inability to get land bank, financial difficulties of the State Electricity Boards, etc. The government is trying to address these. The valuations factor in most of these. Hence, stay put.

Which is a better way to start investing in the stock market: Stocks or equity mutual fund?
The mutual fund route is advisable. Equity investing is a full-time job and needs expertise.

I was told banking stocks are a good bet, as these benefit most once rates start to cool. These are available at cheap valuations, too. What's your take?
It is true the banking sector will be the foremost beneficiary from the rate reversal. Banks will benefit not only from an improvement in credit growth, but also from appreciation in their treasury portfolio. Hence, it is advisable to invest in this sector.

The writer is managing director and principal portfolio manager, Capital Portfolio Advisors.
Views expressed are his own. Send your queries at yourmoney@bsmail.in