You manage around $1.5 billion in an India-dedicated fund. What is the overall view that you are taking on the region?
Wehave been fully invested in the past six months, because our view is that though valuations are not inexpensive, there is no extreme overvaluation at around 16.5 times forward earnings. There is a clear opportunity within the market in certain sectors and that is what has played out in the past six months. Certain sectors and stocks have played out better than the rest of the market.
What is your time and return horizon? What have you bought since you are fully invested?
We always ask our investors to come with a perspective of at least 2-3 years, because in the near term, the market can be choppy. Tomorrow, if you have any global sovereign crisis or something else, the market can quickly correct by 15-20%. But let’s realise that the emerging markets growth story is a real story. For instance, in the past one year, investors in our funds in Korean bonds would have made gains of nearly 150-160% across funds.
We feel that since valuations are not cheap, you will see a time correction. So, we expect the market to be range-bound till mid-June. And as inflation tapers off, it will peak off in early May or June. And as people draw more comfort from FY12 earnings, we expect the market to take the next leg-up from there. In terms of sectors, we are positive on financials. The sector has underperformed since last July but we are clearly behind the inflation harm. Apart from that, autos and pharma are the other interesting sectors.
If you were to review your portfolio at the moment, what would you get out of?
We have been booking some gains in commodities. The belief is that commodities, in general, and steel, in particular, may look slightly vulnerable, if we have some kind of a slowdown in China next year. Look at the steel intensity of that economy that’s nearly twice that of the US and other developed economies. So, steel is one specific space where we are booking some gains. In terms of increasing exposure, real estate is one space we have virtually very little exposure. So, we are gradually building our exposure into real estate. PSU banks have underperformed, and on every dip, we are looking to add to our positions in these banks.