Mkts can give good retuns over 12-18 months: Principal MF

Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Principal MF launches Principal Emerging Bluechip Fund Stay away from new funds: Value Researchonline Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Principal Emerging Bluechip Fund is an open-ended scheme which opens for subscription on September 22 and ends on October 10. The scheme is focused on strong mid- and smallcap companies with improving fundamentals.

 

Pankaj Tibrewal, Fund Manager, Principal Mutual Fund, said the scheme will follow a bottom-up stock selection process with a minimum 65% allocation to midcaps.

 

He feels the markets can give good returns over a 12-18 month period. "It is a market where if you have convictions at bad times, you can pick up stocks which can generate multiple returns over the next two years. We believe that the time is not for bottoming of markets, but it's a time when investments made can give good returns over a 12-18 month period."

 

Here is a verbatim transcript of the exclusive interview with Pankaj Tibrewal on CNBC-TV18. Also watch the accompanying video.

 

Q: We have seen the midcap index retracing about 45% from its highs. Do you think it's the right time to come out with a midcap fund?

 

A: There are two angles to that. From the marketing sales angle, it's probably the worst time probably to come out with a fund because sentiments at the retail or ground level are extremely poor. From the investment side though, it's a very good time than had I launched the fund say 7-8 months back. So, the Sensex may be at 13,000-13,500, but a lot of stocks, even after their profit numbers of the last three years, are at 2005 and 2006 levels when the Sensex was about 6,500-8,000. From an investment perspective, it's a great time. One needs to understand that at the end we are managing investors money. If you can judiciously do that by launching a fund at times and probably taking a 12-18 month horizon to generate great returns, that's what investors are looking at from our end.

 

Q: What would you tell an investor who is putting money into your fund? Would you tell him to trust you and treat it as a close-end fund for say one or two years? What is the timeframe he should be looking at?

A: I don't know when the markets will bottom out, probably in 6-8 months. From a stock specific angle and a bottom up stock picking approach, there are lot of values or value picks in the entire universe. From a 12-18 month horizon, investors should be looking to generate great returns on this fund going forward.

 

Q: Have you defined a particular kind of market capitalisation that you don't go below, say Rs 50-60 crore, or would you look at only higher than that, though you are open to everyone?

 

A: I am open to the entire universe. As per the offer document, the range will be between 65% and 95% for midcap stocks. We have taken midcap index as our proxy or benchmark. The range as on August 29 was some where between Rs 1,200 crore to Rs 15,000 crore for midcaps. For smallcaps it is 5-15%, so anything below the last stock of the midcap index falls in the smallcap category. So, the universe is open to us at large. Going forward, India is a story of stock pickers. It is a market where if you have convictions at bad times, you can pick up stocks which can generate multiple returns over the next two years. We believe that the time is not for bottoming of markets, but it's a time when investments made can give good returns over a 12-18 month period.

 

Q: What are you going with in terms of an unspoken conviction? Do you think this market is going to see fairly severe reverses from here or do you think 3,800 could be challenged? What can be the kind of bottom that you may be looking at?

 

A: On the technical front, I don't know whether it is 3,800 or 3,700. There may be some global noises or negative news which may flow into India, which in the short-term may keep the markets rangebound or probably at lower levels from here on. But on a stock specific level, we have already seen the fist leg of erosion, which is about 40-50% in different levels of stocks. We are entering into the second leg of correction, which is a small poison with a downward bias of about 10-15%. From there on, things will start looking up probably from the first or second quarter next year. I am clearly betting on that. Over the next six months, you will find great stock picks, values, and people off-loading their stocks without convictions. If we have a mandate to manage that fund on a midcap and smallcap level, we can do that justice to that money.

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