A Balasubramanian, CIO, Birla Sun Life Mutual Fund said they have to constantly change their portfolio considering factors like rupee depreciation. He told CNBC-TV18 that they are underweight on IT as a sector and oil marketing companies.

He expects the market to move in a range of 16,500 to 18,000 broad index on the market side. The volatility that used to remain in the past has come down to a large extent, he added.

Excerpts from CNBC-TV18’s exclusive interview with A Balasubramanian:

Q: There are two major macroeconomic themes are playing out: crude related inflation and rupee depreciation. How would you play both of these?

A: It’s tough to play on both especially at a time when everyone is fighting for controlling inflation through various fiscal measures taken by the Government of India. Rupee appreciation would have been ideal to control inflation. Today, we are in a scenario where crude is searching for new highs and the currency is depreciating against the US dollar. The demand in oil is also increasing the overall input bill.

We need to constantly keep changing our portfolio to some extent taking into account the rupee depreciation benefits, which will come in some of the sectors that are largely export driven. At the same time, some of the sectors will get impacted not only by rupee deprecations but even by high crude oil price. From the portfolio point of view, we have made some reallocations to these sectors.

Q: What are the reallocations that you have done?

A: We are relatively underweight to the index on IT as a sector; we were just about 2% sometime back. Keeping in mind, the overall rupee depreciation, our exposure would have gone up from 2% to close to 6-7% on IT as a sector. At the same time, we always remain underweight on oil marketing companies despite the overall replacement value could be substantially lower. But high crude oil prices increase the loss for these companies. Hence, we have remained underweight on that segment. These are some of the portfolio allocations which we have done keeping in mind the oil price movement as well as the rupee-dollar movement.

But on a broader theme basis, the market has also given a presumably good jump from the bottom, close to about 26% of redemptions have come just from the bottom of the market. Some bit of profit booking is coming from the last 3-4 days. A bit of risk appetite is coming back towards the good investment that are happening since the last 3-4 weeks. That is one of the reasons why we saw some bit of interest coming back both in the emerging markets which included India as well.

Q: With respect to the market’s profit taking now, where do you think the market is headed in terms of a bottom? How much do you see it slipping under the current bout of profit taking?

A: It’s difficult to put any kind of a number where one can target on both the indexes- Sensex as well as Nifty. Clearly, the volatility that we have seen some time back is coming down. Having seen almost 2,500 points rally from the bottom, I would assume the market would probably move in a range of 16,500 to 18,000 kind of broad index on the market side. But the volatility that used to remain in the past has come down to a large extent.

For more Mutual Fund Interviews click here