Indiabulls MF to foray into equity space with bluechip fund

Excerpts from Markets Midday on CNBC-TV18 Watch the full show »

Indiabulls Mutual Fund is foraying into the equity space with its first equity mutual fund. Aviral Gupta of Indiabulls Mutual Fund spoke to CNBC-TV18 about the product and the way ahead for the industry.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: Take us through your product, a bluechip fund...

A: We are launching our first equity product on January 20. I will just go through a brief journey which we have had in Indiabulls Mutual Fund - we got a license in March 2011. We took a very cautious approach. In November, we launched a debt fund, basically a liquid fund and in January, we launched the short-term fund, again a debt product. So right now, the corpus is Rs 1800 crore.

This is the first equity fund in which we will be investing in blue-chip companies. Basically our definition of blue-chip companies as per the Scheme Information Document (SID) document is anything above market cap of 100 first companies in BSE 500.

What we believe is that the markets have very negligible negative short value left there. We know what's happening in Europe, we know what's happening in US - it is stabilizing in much better way compared to what we had expected. India, as such, we are keeping our fingers crossed on policy reforms which we expect in case Congress does well in the UP elections.

Q: So would you say that you are timing this fund because you think that perhaps downsides are limited? Is that your position?

A: Absolutely. The downsides are limited and it's the best time to launch an equity product and provide investors with a core portfolio of blue-chips.

Q: Can you tell us about the sectors that you would be looking at?

A: I would be overweight on basically interest rate sensitives - that's one thing which we have thought about. Second thing, I would be bullish in is the stable business like IT. If we go by last two days action in IT stocks, I believe it's over. It wasn't called for. The underweight sectors would be telecom and power. Rest of them would move in between overweight and neutral.

Q: You said you are negative on power and telecom - both those represent significant NPL risks. So within the bank Nifty, is there any favourite in terms of how you would go about choices?

A: We are looking at the business model. Specifically, we are more bullish on private sector banks where there are some banks. As per regulations, I cannot name the stocks but there are some banks in the private sector which have got strong risk management processes in their systems. So that's what we will be looking forward to.

Q: When you talk about blue-chips, give us a combination of what you are looking from the broader markets as a percentage of your fund as opposed to Nifty stocks?

A: The mandate is 65% which means minimum 65% has to be in bluechips as per definition given. The market-cap above 100 first companies in BSE-500 are there and rest 35% can be midcap or smallcap. We get that 35% open at our discretion.

Q: What about the top 500 companies?

A: Anything above 100 first companies, market-cap above 100 first companies in BSE-500 - that's the definition of blue-chip. So, minimum 65% has to be there in those stocks.

Q: So at the moment, would your corpus be weighted in favour of heavyweights or would you go for a good mix of midcaps?

A: At this point of time, where the markets are, I will be focusing on basically CNX-200. Slowly, we will diversify the portfolio into midcaps and smallcaps and bring in 35% into action.

Q: Any sort of contra buys that you would include in the fund?

A: Absolutely. If you ask me my contra bets - it is going to be capital goods this year.