What is your equity market outlook for this year?
Currently, market is close to 16x FY11 consensus earnings, which is close to its long term average. In 2010, we don’t see much upside at the index level. Bottom up stock picking will drive the fund performance.
Which sectors are likely to out-perform and under-perform during 2010?
Consumer staples, IT, healthcare and oil & gas should out-perform and industrial and materials should under-perform during the year.
Do you see mid-caps out-performing the large caps in 2010?
Mid-caps are still at a discount to large caps, which makes a case for out-performance. However, the gap has reduced in the last one year so out-performance might not be huge.
Do you expect the government to begin withdrawing stimulus soon? What’s your GDP estimate?
We feel, the government will start withdrawing fiscal stimulus in the budget. Our GDP growth expectation is around 7% in the FY11.
To what extent do you see bond yields hardening by the end of year?
Bond yield might not harden much by the end of the year. It might go up to 8%. However, bank lending rate might harden by 100 bps.
What would be your inflation target for end-2010? What could be the extent of policy rate tightening by RBI during the year?
Inflation for end FY10 should be 9-10%. However, it should come down after that. In FY10, we don’t see much tightening barring CRR hikes.
What is your take on the upcoming Budget?
We see withdrawal of fiscal stimulus given during the year. Fiscal prudence will be the order of the day. We expect roadmap for PSU divestment also.
Do you feel PSU stocks are still available at attractive valuation or are you betting on the PSU disinvestment theme?
PSU stocks are currently available at 20% discount to the larger market. We feel PSUs are at an attractive valuation. We are not solely betting on the divestment theme as PSU companies in which we are investing are fundamentally sound companies and have good growth prospect.
NTPC, ONGC and BHEL are the top three companies in your PSU Fund. What are your long-term views on them?
We don’t comment on specific stocks. We have taken long a term view when we have constructed the portfolio of PSU fund. In the long term, we are positive on this portfolio including top holdings.