Sundaram BNP Paribas today launched select thematic funds, PSU opportunities fund. In an interview with CNBC-TV18, J Venkatesan, Equity Fund Manager at Sundaram BNP Paribas Mutual, spoke about the new fund offering (NFO) and his views on the way forward for the markets.
Here is a verbatim transcript.
Q: Why a PSU fund at this juncture-haven't PSU stocks already run up significantly in the past few months?
A: Public sector undertaking (PSU) presents an interesting opportunity as an asset class. We think that if one wants to play long-term economic growth in India, it is one of the best way proxy play to play. We believe that there is a lot of news that would come on disinvestments. Also, there is good valuation gap which is asset class which we think would get narrowed over the time. So we think this a good opportunity to enter even at these prices.
Q: Would the valuations worry you. The Bombay Stock Exchange (BSE) PSU index has doubled since its lows in March?
A: At these levels of Index we still think that there is a good value in the PSU as an asset class.
Q: What sectors do you prefer within the PSU basket?
A: If you look at PSU as an asset class basically in four sectors-energy, financials, utilities and material and they do have a dominant share in those sectors and it is difficult to imagine growth for India without PSU; they are either contributing for it or benefiting from it. So what we think is that these four sectors would form a major portfolio allocation in our scheme.
Q: Can you rank these four sectors?
A: I think financials, energy, utilities and materials in the order.
Q: What about the markets-do you see more headroom for these markets considering the way in which valuations are at this point in time? There are some who believe even all time highs can be taken out?
A: But we have also seen a fairly large fall last year. So the point I am trying to make is, short-term we continue to remain cautious but on technical grounds. On liquidity grounds especially with the funds flowing from exchange-traded funds (ETF) routes, I won't be surprise if the market still seeks higher levels. However, having said that, on valuations we are not at euphoric valuation level but we are at a valuation above market average valuation levels. So in the short-term there could lot of bouts of volatility in this market, but India has always been a medium-term story. One has to be patient investor in developing economy like India. So on a medium to long-term perspective India continues to look good.
