In an interview with ET Now, Sunil Singhania , Deputy Head-Equities, Reliance Mutual Fund, talks about the market, their approach to the banking space, and their favourite sectors.
Excerpts:
I am afraid it is not a very Happy New Year for Indian market watchers. The year 2011 is off to a shaky start?
If you look at the last one week, you are right. But we are more optimistic. We were viewing India from a much longer-term perspective and headwinds always keep on coming. Over the past, Indian economy and the Indian markets have proven time and again that they are much more resilient and the optimism from a longer-term perspective, at least from our perspective, continues. So not denying the fact that we definitely have some headwinds in the near term, we remain as optimistic as we ever were.
In simple terms, how are you using the current volatility or decline to your advantage? Are you buying and if you are buying what kind of themes, sectors or even names you are buying?
If you see the figures, most of the domestic institutions have been on the buying side of the last 4-5 days, specifically in stocks and sectors where the fall has been very pronounced. These kind of opportunities keep on coming. We will know whether we were right or wrong only in the future, but for long-term investors like us or any other domestic institution, this definitely presents an opportunity to buy stocks from a longer-term perspective and that is what the attempt has been over the last one week or 15 days.
What has been your approach to the banking space? Aside of yourself, there are a lot of sector oriented banking funds in the market. You also have one fund which is having assets under management of about Rs 1600 crore. Given the volatility, given the interest rate scenario, how are you approaching the fund, have you seen fund outflows out of your banking fund?
Coming first to the funds specific to us, banking has been one fund where we have been continuously seeing inflows. A lot of investors have seen the super returns, which the sector has given, and also the fact that our funds have also done well. Over the last 2-3 months, that is one fund where we have been getting the maximum inflows and which continues.
As far as the sector is concerned, obviously 2009-2010 belong to the banking sector despite the fact that we are coming out of a very difficult 2008 and early 2009 where almost globally all financials continued to see a lot of stress and from that background, investors made a lot of money.
There was definitely some optimism which was overbuilt into the price towards the last quarter of last year and once we got into a headwind, which was higher inflation than what people expected, short term liquidity tightness, which is even now pronounced, the sector just got sold off. At this point of time we do believe that there are near term challenges, but whether the prices have already reacted to that our view would be that they have already reacted to it.
Now in banking fund, we had around 12%-13% cash 10-15 days back and over the last 3-4 days we have cut down that cash to nearly half of what it was. So we are again using this opportunity specifically in the second tier banks where the fall has been much more pronounced and specifically on the public sector side and hopefully the stock should start to do well as the headwinds recede.
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