How does HDFC MF view Sebi's new norms?

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS SEBI extends ASBA to MFs, reduces NFO period to 15 days

Q: So what would atleast the sector bets be?

A As we always say as a fund house we avoid giving stock or sector calls. We are invested. If you look at our portfolio, it is pretty obvious that we positive on baking and financials as well and that shows up in our portfolio pretty evidently. We are also positive on pharmaceuticals, engineering and infrastructure is the other play.

I think we are not as much top down necessarily. We actually believe in being a bit more bottom up in our approach because a number of companies in a single sector don't show very homogenous characteristics. So it's more to do with, even within the sector, picking good companies which are strong on corporate governance showing good earnings growth and reasonably priced. This is not a market where you are going to come across the company which has got great growth prospects and great management quality and is waiting at some very ridiculously low PE, there are no sitting ducks now in this market. So it's a lot more hard work and I think we have the talent in the team which is budding the midnight oil to do that.

Q: You can't utilize your unit premium reserves anymore for dividend distribution so, should we understand that dividends may start coming down?

A: I don't think one should come to that conclusion quite soon. It's a simple proposition you know in accounting when you have a face value of 10 or a 100, you raise new capital at a premium that premium is not allowed to be used for dividend. Here the accounting commonality has been drawn in to the mutual fund accounting and form what you have to pay dividend.

I don't think one should come to a conclusion of saying dividends will come down. I think it is more to do with the need and probably to be more able to realize gains as compared to the unrealized gains as using the unit premium and as I said it's not a game changing role to me in my mind.

Q: Would you worry at all about inflation we had that ugly number coming yesterday and you know the way real estate prices are going around it's not really only confined to goods, we do see it in asset classes as well. How much would you worry that inflation or for that matter interest rates may jack such growth trajectory that we are seeing over the past couple of quarters?

A: Inflation is a big issue, it obviously impacts the lower sections of our society which is the lower income group. The key is to understand where that inflation is coming from. We also have to keep in mind particularly when you look at the Indian numbers and then compare them on the context of emerging markets, India is significantly under leveraged both at a corporate level as well as a household personal level. In India, we have a high savings rate, so if you look at the corporate balance sheet, we always talk about profit and loss in our companies in India, I would urge any analyst to go through balance sheet of companies in India five years back and compare them with now, you will find significantly lower leverages. Apart from that even as individuals or households the personal leverage used to be 3% and now its like doubled to 6-7%, but it's as low as 6-7% and developed markets have leverages of 30-40%. So there could be a few sectors which are very commonly called interest rate sensitive, but given the fact that we have a very low leveraged boat at the corporate and the retail level, we don't think it spook the growth story or the momentum story. But some impact in some sectors would be there obviously.