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Expect volatility to continue in short-term: Lotus AMC

Published on Tue, Nov 27, 2007 at 14:00 | Source : Moneycontrol.com

Updated at Wed, Nov 28, 2007 at 10:08

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Nifty

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Tridib Pathak, CIO at Lotus AMC has a view that more volatility can be expected in the months to come. He adds that global credit markets will continue being in a turmoil state and that will certainly lead to more volatility.

Excerpts from the exclusive interview with Tridib Pathak:

Q: How do you view the market over the next month because we have a December 11 meeting from the Fed and more importantly after that we will be closing the calendar year? Do you think we can make it to the all time high level and how much of a trigger do you associate with that December 11 meeting?

A: We feel that in the short-term over the next few months, we do expect continued volatility in the markets. It is more to do with the global scenario and concerns on US recessions which are growing day by day. Global credit markets are continuing to be in a turmoil state and that's a concern, which will certainly lead to more volatility. If you look at the Asian markets, there are more concerns on China now. China is trying to slowdown its economy and upto 20% of China's companies profits are coming from investment income.

So all these are leading to bubble proportions in China and there are worries out there. Closer, home of course, the participatory note issue is having its impact over a period in terms of caped flows, in terms of FII inflows in the markets. So we do believe that we are certainly going to see more continued volatility in the short-term. Nevertheless on the earnings growth aspect, the earnings growth trajectory remains quite strong. Indian companies are continuing to surprise in the positive.

Q: As a fund house do you think the domestic funds over the next month or two will continue putting in more money because we have been sitting on a lot of cash and for this month as well they have put in about a billion dollars?

A: I really can't speak for the industry but the fact is that we as a mutual fund house in all the funds are completely invested. We have marginal cash levels of 3-5%. Our whole focus is on individual stock selection and overall strategies and team selections per say though we do expect markets to be volatile no doubt.

Q: What have you made of this entire out performance that we have actually witnessed vis-�-vis global emerging markets at this point of time? Do you think that's actually sustainable or the first signs of the correction that you have seen over the past couple of days makes you think that we are pretty much fall in line?

A: That's a good point. One of the reasons we would expect the shorter-term volatility to continue is the fact that we have done quite well over the last couple of months in comparison to rest of the emerging markets. So to that extent, we would expect that to catch up with us in terms of higher volatility in a scenario where you are not seeing incremental flows coming in due to the P-note issue ultimately.

Q: Since you are deploying money at this point of time, would you look at autos or real estate both sectors? Autos particularly in trade today have shown a bounce back and real estate yesterday?

A: We are selectively buying companies in autos and real estate. We are not overweight on both these sectors. Probably you can say that we are neutral though far more selective in autos. We are focusing more on the four-wheelers space and real estate, more on national level companies rather than regional level companies as such.