Find out why Madhu Kela will be 'extremely cautious' now

Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty?

Q: I know the last time you spoke with us you weren't completely happy about the kind of pricing a lot of the primary market issuances that had particularly by way of initial public offerings (IPOs), in that sense do you think there are less opportunities from IPOs?

A: I would agree that. I just did a global watch on the recent offerings which have happened. USD 20 billion is globally raised in September and 50% of that issuance which has been raised is trading below the price that is being offered. Cumulatively people have only made 3% return on this USD 20 billion investments. So it is not only an India phenomenon, I think the last man who is standing out and not being able to participate, market is sucking him. It is clearly reflected in the pricing as well as the post market returns of these offerings which are happening in the markets.

Q: I want to ask you a question on rupee because that is also influences the decisions of a lot of people who are desperately trying to put money in, is that on the margin and important factor in sucking inflows and do you think with the kind of panic buying that you referred to, the rupee could be headed to maybe 42-43 in the next few months?

A: I don't know whether it is headed for 42-43 in the next few months but our call has been very bullish; post election I was bold enough to call that it will go to 45 and we are now nearing that, we are already at 46.3. I think the direction of the rupee is clearly positive from hereon.

Q: What level of desperation do you hear from global investors who you speak to and do you think they have invested whatever they wanted to or there is still a lot of paint-up cash which they need to deploy?

A: If you take it over a longer period of time, there is a lot of cash which is going to come to India. I was in US and I met at least 25 people in ten days, not one guy was convinced about the kind of India story which we can foresee. People are still tactically playing it, so if the MSCI weightage is 2.5% and I am 3% but are there enough people who have played out with conviction? I don't think that has happened. But as the market continues to perform and as there is a clear differentiation between emerging market and developed markets, if you ask me a 3-5 year perspective, I am extremely positive on flows with my recent visit.

Q: You have been a midcap guy at heart, how are you feeling about the midcap end of the market both in terms of value and outperformance from here?

A: Just go back to Reliance Growth Fund performance, if you take it in a longer-term perspective, the index has delivered half the returns which Reliance Growth Fund has delivered over the last fourteen years. We have beaten our benchmark by more than 100%.

I continue to believe that the kind of India story which is going to unfold over the next three-five years, you will continue to see opportunities in the midcap space and you will have to bet on the right entrepreneur at the right price with a timeframe in which one is able to execute one's dream. I would continue to play selectively these midcap companies.

One sector, which I am excited to look at at a right valuation, is on the power generation side because we are just doing our numbers. Lot of these companies have raised money but the recent rates which have been commanded in the power sector at 3.30-3.40 for 20 year kind of a purchase agreement, I think there could be interesting opportunities there.