Q: What about the interest rate situation because we have had an uptick yesterday, how are you positioning yourself in some of the interest rate sensitive sectors now like banks, autos, real estate?

A: I think the repo rate hike was more or less expected by the bond markets, maybe not fully by the equity markets because the bond markets have already reacted by 5-10 bps. I do not see any major rise because of the repo rate hikes in the interest rates on an immediate basis. But yes, I certainly see the Reserve Bank of India (RBI) showing some hawkish signs on the inflation. As and when the oil price hikes get factored into the inflation numbers, it might inch very close to double-digits.

The RBI would maintain its hawkish stance towards the interest rates and inflation for the simple reason that they might be able to give up a little amount of growth even if they have to control the inflationary expectations. I think banks and autos sectors will be impacted and I think that the hawkish stance has already been in the price of some of the banks and the auto sectors. So there is no point in reacting to these kinds of changes to churn the portfolio in the short run.

Q: You have got quite a bit allocated to energy as well as a space. What leg of energy do you like right now between power and oil and gas and within that is it upstream, downstream what you prefer?

A: If you look at the Quantum long-term equity fund portfolio, we have got exposure to the oil and gas upstream as well as oil and gas downstream. As far as upstream goes, we do hold Oil and Natural Gas Corporation (ONGC). On a longer-term basis ONGC being available at a P/E of around 10, looks reasonably attractive.

As far as the downstream goes, if you talk about the three major oil companies ie. Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL), there are problems now and these problems have cropped up because of the wrong policy adopted by the government as far as the oil prices are concerned.

The misallocation of resources within the economy from oil companies to fiscal deficit to consumers has created a lot of issues. But we believe that ultimately there will be a long-term solution to it and these stocks will continue to do well.

So we are holding onto the Quantum long-term equity fund. We have exposure to the oil and gas upstream as well as the downstream.