Multi-year growth to fetch good returns in mkt: Reliance MF

Investors are celebrating this Diwali in style by taking part in Mahurat trading today.

In CNBC-TV18's special show Mahurat Trading, Sunil Singhania of Reliance Mutual Fund says the India story remains optimistic for those looking to invest here. He continues to be bullish on our equity markets as ever.

According to Singhania, investors who track India on a longer-term perspective, have much more to gain since India is a multi-year growth story.

"When the story is so good, returns ultimately are going to be made big time in the equity markets," he adds.

Below is an edited transcript of his interview. Watch the accompanying video for more.

Q: Are you hopeful going into the next year or are you a bit cautious?

A: Any long-term investor in India will always be hopeful because the growth story in India continues. There are hiccups which have been more prominent over the last one year both due to domestic as well as global reasons. But very clearly, investors and people who have been tracking India from a longer-term perspective, there is no doubt that this is a multi-year growth story. When the story is so good, returns ultimately are going to be made big time in the equity markets. So we remain as positive as ever.

Q: You have products in gold and equities. Gold did much better last year. This year if your investors came to you and said - should I buy Reliance Gold ETF or the Reliance Diversified Equity Fund, what would you lean towards?

A: Gold has done very well over the last eight-nine years. It's the only asset class which has given positive returns every year since 2003. Even going by the law of averages, we are probably in a period where gold might move in a range and equities which have not done anything for the last two-three years probably will see the best to come in the next two-three years. For investors who are looking at a couple of years, equity definitely looks to be a much better option.

Q: Aside from the equity and gold fund, you also have an infrastructure fund. What have you made of the way these stocks have collapsed? The numbers have not been good. What is it that you do with infrastructure as a space now?

A: The space had a lot of promise. The manifesto of all the political parties clearly pointed towards the fact that they also wanted to concentrate on infrastructure. The country needs it and if you really have to grow at the pace at which we want to, it is definitely a sector which has a lot of potential. Unfortunately, the last one-and-half year has seen everything possible go wrong for this sector whether it is interest rates going high, equity raising becoming very difficult, issues on land acquisition, political problems, some scams coming out from the Commonwealth Games etc, so everything has gone wrong.

One interesting thing which has been there in today's newspapers is the fact that there is a statement that the UPA is going to now focus on developmental politics which is a very welcome step. All political parties have started to realise that to win elections you now have to focus on development. That should gradually lead to sorting out of all the mess which we are seeing on the political and the scam front.

There is no denying the fact that the sector has a lot of potential. So while admitting that the sector has not done well and there are definitely some challenges even in the near term. It is possibly time to at least start looking at the well run companies in the balance sheets which are in a position to withstand this high interest rates in the near-term.

It might be a little early and we have seen in the past when these companies start to grow, the compounding effect of growing at 30-40% can be very high and suddenly you see companies which have Rs 400-500 crore turnovers starting to report Rs 3,000-4,000 crore of turnover. So while admitting that things have been rough probably its time to give them the benefit of doubt at least for the well run companies.

Q: The other sector funds that you run is banking. The RBI's move led to banks coming off. Are you bullish or bearish for the next one year on banks?

A: The sector has done phenomenally well over the last eight-10 years except the last one year. It's a sector which gets impacted directly by what happens on the interest rate front. Our view over the next one year is we will definitely start to see significant softening in the interest rate regime. That is one sector where slowly all the concerns which are there right now whether it is high interest rates, it is the NPA problem which is largely a reflection of the high interest rate, all will start to get sorted out.

The kind of valuations which you are seeing right now in banks largely on the economy and the stock market front, very few people are looking at it from a positive front. They have already fallen to below book for a lot of PSU banks. Even in terms of the larger private sector banks, except for a few, we have seen valuations plummet to probably three-four year lows in terms of the price to book.

But I think we would definitely be positive. Deregulation of the savings bank account is more a sentimental negative, its not going to have a very large impact. Most of the banks have average savings balances of between Rs 25,000-45,000 and below Rs 1 lakh. There is more impact on the stock market front than it is going to be on the actual operations front. So from these levels, we will definitely be viewing the sector with a positive view.