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

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

Madhu Kela of Reliance Mutual Fund believes that the markets may see a phase of 'buying panic' and will be cautious in the short-term. "Earnings upgrades will take place gradually," he opines. He prefers low-beta stocks over the high-beta ones for six months.

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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?

Today is an important day for the country's largest mutual fund, Reliance Asset Management company as Reliance Mutual Fund, the Growth Fund, celebrates its fourteenth anniversary. Commenting on the market, Madhu Kela, Head Equity Investments at Reliance Mutual Fund says he believes that the markets may see a phase of 'buying panic' and will be cautious in the short-term. "Earnings upgrades will take place gradually," he opines. He prefers low-beta stocks over the high-beta ones for six months and sees a lot of value in PSU banks. He is bullish on the power generation space.

Kela expects to see rupee at 45 per dollar and feels inflation may hit 7-8% in the January to March quarter.

Here is a verbatim transcript of the exclusive interview with Madhu Kela on CNBC-TV18. Also watch the accompanying video.

Q: Fourteen years is a long time, can we still talk about growth out here for our market from where we have reached though?

A: Absolutely. In the last fourteen years, India has truly been very exciting and particularly as a professional it has been extremely exciting journey for me over the last seven-eight years working with Reliance. If people look at these things in perspective, we launched Reliance Growth Fund at Rs 10 net asset value (NAV) 14 years ago and our NAV is now approximately Rs 390. So people have made like 39 times their returns in a mutual fund over last 14 years. This is what I keep harping upon every time that it is not extremely important to time every 500 points plus or minus for retail investor. As long as you have a faith in the larger India story, I think these kinds of returns are only possible by staying put and not jumping around for every 500 points.

Q: What is the next 500 points on the Nifty, up or down you think before we talk about the longer-term?

A: In my opinion, in the short-term there could be a buying frenzy, I would like to call it a buying panic rather. Now people are waiting for this correction to happen and now I see people are giving up hope for the correction. So if you see the recent subscription of so many of these new fund offers (NFOs) and qualified institutional placements (QIPs) and the secondary sale, the ease at which it is happening and after sale of all this where investors are not making money, it is clearly showing signs of desperation just to put money because you can never be fired for being 100% invested but you can always be punished for being 20% in cash. So I think that psyche that we have to just put the money is coming in the markets. So I think there could be a buying panic over the next one-two months but I would be extremely cautious from hereon to play the markets and we would like to play where we believe individual company story rather than playing the broad markets.