Bull run to continue for year or two: DBS Chola MF

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R Rajgopal, Head-Equities of DBS Chola Mutual Fund says the market seems to be on a bullish trend and the bull run will continue for a year or two. Rajgopal adds that the futures market will remain range-bound this month. 

He states that going by the newer IPOs that seem to be coming up in the market,the retail and institutional investors like XL Telecom alook quite optimistic to him.

Rajgopal adds that they have been having a very positive view on the market for quite some time and believe that the trend does look north bound, which is the reason they have been using derivatives to do some portfolio rebalancing.

Excerpts from CNBC-TV18's exclusive interview with R Rajgopal:

Q: What have you made of the run up in the market so far?

A: It is daily one-day match that's been going on but one thing is clear that the market seems to be on a bullish trend and I believe from here on for a year or two, the bullrun will continue.

Q: In the near-term, what is the sense you have of how much more it could run up in the next 2-3 weeks since there is an important event ahead?

A: To put a number is difficult but with the Q3 results out, the consensus raising FY08 estimates by 2-3% now, it is around 840 for the Sensex and that makes it trade around 16 times which is definitely a comfortable level and I see it the current levels could sustain and move forward.

Q: You track the futures market as well, any signs that this entire space is getting overheated ahead of the Budget?

A: Not really, I do track the futures market, that gives me a lot of comfort that it will at the most remain a range bound market this month but the Budget is going to get spilled over to the next series actually.

This is a very short month and purely from a derivative angle the range seems to be around 4,150 to 4,260. Momentum and the kind of money inflows that continue to happen in couple of growth sectors like telecom, cement and banking, I believe the Index can shoot the upper target as indicated by the derivative than the lower target.
 
Q: Which of these newer listings have appealed to you like the XL Telecom?

A:  I would not like to comment on any particular stock but going by the newer IPOs that seem to be coming up in the market, the retail and both institutional investors are quite optimistic about listings.

Q: How do you map the move from here up until the Budget, will it be a steady run up?

A: I think so, we at DBS Chola have been having a very positive view on the market for quite some time now and we believe that the trend does look north bound and that is the reason we have been using derivatives to do some portfolio rebalancing in the portfolios and I believe the market continues to remain bullish.

Q: You made a point of playing the market on the derivative side. Where is it that you would take long positions at this point?

A: At DBS Chola Mutual Fund, we are using derivatives to basically rebalance the portfolio. By that I mean the asset allocation between cash and stocks can be done using derivative and also some kind of portfolio hedging if the need arises.  But currently, my view has been quite bullish for some time now. So we have been using it basically to do portfolio rebalancing.

Q: So in the run up till the budget you are not seeing yourself moving into cash or just a wee bit more?

A: As an investment philosophy, we believe that the equity funds should remain invested all the time in equities markets and you do have undervalued stocks available to you at all points of time.

We believe in a good stock picking with a team of analysts that we have. So I believe cash calls need not be taken at any point of time in the market. The mandate is to remain invested in equities and we would do that.

Q: How will you receive this news, is it positive for the stock (BEML)?

A: I wouldn't like to comment on stocks specifics but yes we do have very bullish view on the capital goods segment.

Q: What have you chalked out as the leaders for this rally now?

A: In terms of sectors, telecom is a big growth story and we have good amount of money allocated towards the sector. Cement is also a growth play, which became a contrarian play a month back. So we have it in our contra fund as well as in out growth fund.

FMCG appears to be very appealing at current valuation because the long term valuations of FMCG companies have been at around 30 multiples which has drastically come down to around 25 times today. I believe this sector has underperformed so far in the last 8 months and I believe there is lot of potential.

Also, the other sector which also looks good is hotels which have not been closely watched by the people at large. That is another growth story that could emerge. As I said at all point of time we will always have some contra plays, which are undervalued, and the value based buying can be done in those. Oil and gas is one such sector, which gives you that opportunity.

Q: Tell us some sectors, which you don't like?

A: There is nothing as such. What we need to do is we need to evaluate at different price points as to what is the intrinsic value there and where is it currently trading. If there is an opportunity, then we definitely would get into the stock and automatically all sectors do become attractive.

So if you talk of sugar today maybe yes, near term earnings seems to be on the lower side but a time would definitely come wherein the price levels would be such that it too could turn positive.

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