+ve on infra despite high valuations: Reliance MF

Excerpts from Bazaar on CNBC-TV18 Watch the full show » BSE | NSE 01/01/70 Are Mutual Funds betting on ?

Q: The space you have picked has seen the biggest price appreciation since the election results to now. In that, how important do you think the budget is going to be for sectors like Infrastructure, power etc?

A: As far as the budget is concerned, it is well known that this government is focused towards infrastructure and faster GDP growth. In that respect, not too many surprises are expected. At the same time, what the street as well as most of the investors would be looking at is a clear direction from the government on the roadmap of the next 3-5 years. Both infrastructure and power hopefully should be the key focus area for the government. We remain quite optimistic on both of these especially given the sound bytes which have been emanating from the government side in the last one and one-and-a-half months.

Q: Can you even give us a ballpark number of how much have you deployed already?

A: We have around Rs 2,350 crore at this point of time. We would assume that the deployment would be somewhere in the region of 20-25%.

Q: So you have already invested some Rs 600-700 crore?

A: Around Rs 450-500 crore.

Q: How are you feeling about the market? We have been a bit stop-start this fortnight also?

A: We have maintaining this stance that there are a lot of negatives, but are mostly getting built into the price. I remember 3-4 months back when we had a discussion and we were looking at a lot of apprehensions. At this point of time, the same apprehensions about valuations not being cheap and monsoons being there and global scenario still not out of the woods being there, all that would mean that this is definitely apprehension and investors are still not as gung-ho as the topping of market would indicate.

In the near-term, negatives in the form of rains, budget, and a lot of QIPs coming still remain. But if you actually see a perspective where India emerges as one of the fastest growing economies which again looks like doing at 7-7.5 or 8%; excellent moves by the government in terms of the ID project, and a lot of emphasis on execution, then there is a clear case that the India story might actually now start to get re-rated. If you believe that money flow is actually going to start moving towards emerging markets, India stands a good chance to get a significant chunk out of it. That itself can further propel the GDP to a further 0.5-1%. From a 3-5 year perspective, we definitely are quite optimistic on India's potential in economy or in equity markets.

Q: Is real estate going to be a part of the infrastructure fund and of the Rs 500 crore you have deployed, have you participated in any of the recent QIP in the real estate sector. Just want to know your views and whether that segment is included in the money that you have raised in the fund?

A: We do intend to have a very small allocation to real estate stocks which are larger in size and which would be basically more focused on creating housing infrastructure rather than just building one or two buildings here and there. I would not like to comment on specific stocks, but we do have a very small allocation which we intend to do in the real estate sector from this fund.

Q: Will the fund also look at feeders into the space, for example cement or steel?

A: We definitely have that also in mind, but it is again going to be an allocation which is going to be based on the valuations and our perspective of it. So, we are more inclined towards cement rather than steel. But both these sectors definitely would be qualified to be invested as far as the fund is concerned.