Principal PNB Asset Management Company Private Limited is the investment manager for Principal Mutual Fund. It was the first private sector company to tie-up with the Department of Postal Services to sell mutual funds through the postal network. In June 2003, Principal PNB Asset Management Company Private Limited acquired the right to manage the schemes of SUN F&C Mutual Fund. In May 2004, Punjab National Bank and Vijaya Bank bought 30% and 5 % respectively in Principal Asset Management.
Pankaj Tibrewal, Fund Manager, Principal PNB Asset Management Company Private Limited, joined Principal PNB AMC in 2003 as Credit Analyst. He has over four years experience in the debt market. Prior to joining Principal PNB AMC, he had a short stint with Global Trade Finance. He is a graduate in Commerce from St. Xavier's College, Calcutta and holds a Masters degree in Finance from Manchester University, U.K.
Speaking with Fahima Shaikh of India Infoline, P. Tibrewal says, ?Investors should stay invested as fundamentals of India are still intact.?
What are the changing trends as far as investing in MF is concerned?
Awareness has started growing in India. International and domestic fund house are equal contributors for creating awareness. There is a shift seen in investors? class from institutional to retail on the equity side. Another change in industry is fund houses are penetrating the market through innovative ways like distribution through banks network. Fund managers have strengthened the public confidence by giving phenomenal returns. But if anyone says growth in the industry has stopped, I don?t agree. We see much room ahead for mutual fund industry to grow especially when we see US MF industry, which is bigger than bank deposits. Money raised in NFO invested has been boosted the market. With the market doing well, fund houses are able to collect huge funds through NFO. Now fund houses are moving to Tier-II Tier-III cities and absorbing the population which has a long term view. Fixed income group is also participating in mutual funds who want to taste equity.
At current levels, what is your advice for investors in terms of allocation of assets?
It depends upon the risk appetite of the investors. Retired investors would like to have regular income with very little risk. Younger generation can be exposed to equity, whereas a middle age individual will go for balanced fund.
But one can?t time the markets or mutual funds. Many people have not participated in the market when Sensex was at 14,000, as they were waiting for the fall to make an entry. But market zoomed and cleared every hurdle to reach new peaks. A crash in the market is unacceptable, as India growth story is still intact with GDP growing at 8%. Indian companies are now looking at international companies. It illustrates the capability and managerial skills that is building up strong India. Yes, one can stay invested as long term outlook remains positive.
To what extent are the oil price fluctuations a concern?
Yes. It is a concern, because one third of our import bills are from oil. But when oil started moving from USD$65 to USD$90 per barrel, people have stopped worrying about the rise. One of the reasons is rupee appreciation, which is acting as a cushion for the rise. That has elevated the concern. Secondly, price hikes have not been passed on to the consumer, though marketing companies are emphasizing for a policy change. But for a country like ours, where government plays a vital role in controlling oil prices, it is not a major concern, unless that rise is passed on to the general public. But it is a serious matter of concern where free pricing policy is applicable.
What are the other concerns which disturb you in the near term?
Theory of ?decoupling of Indian Economy?, seems to be very popular these days. But if one looks at Indian companies hunting for foreign strategic partners and still believing in decoupling theory, I wouldn?t buy this point. India would grow with a domestic story no doubt. But yes, if anything happens at global level, India would be a participant to the event. Other concern is the psychological factor. Most of the market participants are complacent about the market move, ?If market had a fall of 1000 points a day, it will recover tomorrow. Third factor in the short term would be political issues. Almost 17 or 18 state elections have been scheduled for the next year, many of the populist moves by government are expected, and many pending issues or economic reforms may shape out into policies or may be delayed further. All these political uncertainties disturb foreign institutional investors. And lastly, valuations seem expensive. Some engineering companies are trading at 30-40x P/E to its future earnings.
Which are the sectors you are bullish and bearish?
Investors are paying premium to capital goods, engineering companies. As in a bull market, people pay for vision and not for earnings. If we expect that interest rates have peaked or just behind the peak, one can see decline in interest rate. This would have a positive effect on public sector banks and financial sector. Also volume growth story has kicked in. Though at present, some stocks seem to be stretched, but would balance with their capex plan boosting their volumes next year. At our fund house, we are stock pickers and adopt bottoms-up approach, where in we look at stocks rather than sectors, e.g. many of our funds have IT & pharma stocks, which are doing well even after their sectoral obscurity. On a sector basis we don?t take too much of a call.
What is the story behind the success of your ELSS Principal PNB Personal Tax Saver??
Same funda of bottom picking approach. Our AUM in the scheme has grow from Rs 42 crs in April 2007 to 287crs in November 2007. Being a closed ended scheme it gives leverage to fund mangers like us to pick stocks that are undervalued at present but has the growth potential to spurt in two to three years.
What is the amount of cash you are sitting on?
No, we don?t take cash call aggressively. Investors parked their money to participate in the equity market. Instead of sitting on cash we normally invest in large cap to reap the benefit of equity and get returns above the call rates.
What is your advice to retail investors?
Stay invested with three to five year perspective. You can reap good returns.