Kaushik Dani, Head – Equity Funds, Peerless Mutual Fund is vastly experienced in Fund Management, Investments and related areas for a period spanning across 17 years. He has served as the Equity Fund Manager & PMS Head in K. R. Choksey Shares & Securities Pvt. Ltd. His other engagements were as a Manager – Investments with Birla Sun Life, Associate Vice President – PMS in Sharekhan, Senior Research Executive with SG Asia Securities (India) Pvt. Ltd. and as a Manager Research Data with Motilal Oswal Securities Ltd.
Peerless Mutual Fund is the first mutual fund in the eastern region, headquartered in Kolkata. It is constituted as a trust with The Peerless General Finance and Investment Company Limited (PGFI) as the Sponsor and Peerless Trust Management Company Ltd.as the Trustee to the Mutual Fund. Peerless Funds Management Company Ltd., is the Investment Manager of the Fund and is one of the fastest growing AMCs in India aims to create solutions for the ‘retail’ customer and for the entire investing universe.The company has created its own presence in 38 locations to start with focus on Tier II and Tier III locations.
Replying to Yash Ved of IIFL, Kaushik Dani says "The year 2013 has been steady with large cap indices generating better returns compared to mid and small cap indices. As elections overhang remain for 2014, overall outlook for Equity markets would be Cautiously Optimistic."
How was the year 2013 for markets? What is your outlook for 2014?
The year has been steady with large cap indices generating better returns compared to mid and small cap indices. However, with markets sensing economic recovery, good quality mid and small caps have started performing in past couple of months. Market valuations, though reasonable, are no more cheap.
It is expected that the valuation gap between large and mid caps would get narrowed. Due to subdued growth, sectors which are cyclical and core to the economy have under-performed. With pick up in investments and reforms gaining momentum, these sectors should perform better in the coming new year.
However, as elections overhang remain for 2014, overall outlook for Equity markets would be Cautiously Optimistic.
What are your comments on recent RBI policy?
The central bank in its latest monetary policy review surprised the markets by not taking any action on the rate front. It is evident that RBI does not want to take the step of rate hike in a hurry. Inflation is clearly high. However, both WPI and CPI are at elevated levels mainly on account of high food inflation. With monsoons being good and rabi crop to show its effect over next few months, food inflation is expected to come down. On the other hand, fiscal year-to-date IIP is yet to turn positive and overall growth remains subdued. Thus it makes sense to wait for some more macro data before taking a call on rate hike.
However, if core inflation shows any signs of moving up, then central bank can resume the rate hike process in order to anchor inflation expectations.
How do you see the markets panning out in the coming months?
Markets, though trading near all-time highs, are currently at reasonable valuations. The market multiples are far better than those unrealistic levels of 2008. Also, sector polarization is evident at current levels where defensives are richly valued and cyclical sectors are trading below average valuations.
This phenomenon is common when there is uncertainty in the economy. However, early indicators suggest that economy can probably revive from here. If that happens, then cyclical sectors and investments related themes should start generating good returns. Overall that should lead to higher market levels and also dilute the election uncertainty to some extent.
Brief us about your schemes. Any new schemes in the offing?
We believe that equity markets do offer good value over long term. However, this value is expected to be created over a period of time. Thus, after getting the necessary regulatory approvals, we might plan to come out with a Value based Equity fund sometime next year.
Where do you see inflation going ahead?
We are at a point where WPI is at 7.5% and CPI at 11% plus. Food and fuel inflation have been the primary drivers. On the fuel front, the recent Iran nuclear deal has been a positive. This along with lower demand for oil is expected to bring down the fuel inflation. Good winter crop is expected to bring down the food inflation. Core inflation has been stable. Thus overall inflation is expected to trend lower in the coming few months.
Which are the sectors you are bullish and bearish on?
Global scenario has improved and importantly US is showing clear signs of economic recovery. Positive data points from China and Europe give further confidence to the recovery process. Thus, we believe that the Exports theme is here to stay for long run. Sectors like Technology, Metals, Automobiles and Healthcare are expected to perform well over medium to long term. We also believe that sectors related to capex cycle and investments should come out of hibernation once the recovery is clearly visible. Over medium to long term we also like financials, nbfc’s and private banks in particular and select segments of Energy as well. Sectors which we would want to avoid currently would include Cement, realty and select psu banks.
What is your current Asset Under Management (AUM)?
Our current Asset Under Management as on November 2013 is Rs. 3,399.68 Crs, spread across all the schemes.
What is your advice to retail investors?
Retail investors generally get confidence to enter markets at higher levels. Thus their investment horizon automatically becomes longer compared to other types of investors. As discussed earlier, though markets are trading near all time highs; the potential for equities to rise further does exist. The uncertainties with regards to US QE3 tapering are now behind and global liquidity is comfortable. Markets will have some worries on the election front. However, over a longer period of time, on-going reforms and revival of growth will assume greater importance.
It is important for an investor to select any asset class based on his risk profile and investment horizon. Thus, investors with high risk appetite can go in for good mid cap schemes and those with lower risk appetite can go in for large cap equity schemes or balanced schemes. With markets at higher levels, for investors who prefer to play safe, can adopt a Systematic Investment Plan over next three to five years.