What is your equity market outlook for 2010?
The Indian equity market is trading in a fair range. We are currently at about 17x FY11 earnings and there could be earnings upgrades as we move ahead. Given this scenario, the present valuations cannot be termed as expensive. However, the possibility of short term volatility cannot be ruled out. So, we may see some amount of volatility in 2010, but for the long term, we are bullish.
Which are the sectors likely to out-perform and under-perform during the year?
We continue to be positive on banking, IT, energy and metals, while maintaining underweight stance on telecom, real estate and FMCG.
Do you see rallies being broad based going forward?
From March ’09 to November ’09, there was across-the-board rally in stocks, as investors felt left out. However, going forward we will see more focus on earnings and fundamentals, which will drive stock prices.
Your thoughts on fiscal stimulus withdrawal?
While we have better-than-expected Q2 GDP growth and double-digit IIP data, there are inflationary fears looming and a ballooning fiscal deficit to tackle. With expectations of stability of growth in the economy, we expect some amount of reversal of monetary as well as fiscal stimulus in FY2011.
To what extent do you see bond yields hardening in 2010? How do you see bank lending rates move?
The inflation numbers are peaking up and RBI is increasingly turning hawkish. With most macro indicators pointing towards a revival of growth, focus should turn towards inflation and liquidity management. We anticipate a CRR hike in the coming RBI policy and a repo/reverse repo hike somewhere around March April ‘10. This would translate into higher bond yields by year-end. In our view, bank lending rates will go up marginally in the medium term. Most of the increase will take place in the second half of FY11.
What are your expectations from the Budget 2010?
The budget will lay down measures to cut fiscal deficit for sure. Other key expectations are PSU equity stake sale roadmap and push on infrastructure spending.
What is the stock picking strategy adopted by UTI Opportunities Fund?
Being a sector rotation fund first, the fund follows a top down approach to identify sectors, which will perform in present economic cycle. After identifying sectors, the fund manager tries to identify companies having a high expected future growth rate in those sectors.