Reliance MF sees merit in investing in midcaps

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The new year may turn out to be a good one for equities as corporate earnings are expected to surprise on the upside, believes Reliance Mutual Fund. In an interview with CNBC-TV18, the fund's Senior Vice President - Equities Sunil Singhania said 2010 would be a turnaround for mutual funds. The MF industry has had a sluggish two years.

On the markets, Singhania said he sees merit in investing in midcaps because of the valuation gap between stocks of smaller companies and the larger ones. Reliance Mutual Fund's strategy, he said, was to not take very aggressive cash calls and play stock- and sector-specific strategies.

"We are betting on infrastructure but are not so bullish on consumer plays," he said. "We are also turning positive on cement because of favourable valuations."

Reliance Mutual Fund had about 12-15% cash in its portfolio, he added.

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

Q: Are you feeling confident about 2010 or a bit of vertigo about valuations?

A: As far as Indian markets are concerned, we are always optimistic. In the near-term there are definitely challenges and markets have run-up over the last one year. There are concerns on the inflation as well as fiscal deficit. However, the news flow, which is emanating from the global economy; the recovery, which we are seeing in lot of industries in India, more so in economy building industries like infrastructure, steel, cement. All this lead us to believe that there is definitely upside as far as earnings expectations are concerned.

The markets, which might look a bit valued at this point of time, might suddenly start to look not as overvalued once the earning start to come in. So we are optimistic and hopefully to some extent would be a good year too.