FII flows to continue, realign portfolio now: Pramerica

BP Singh, ED and CIO - Equity, Pramerica Mutual Fund expects a sustained inflows of foreign funds on the back of a delay in Fed's tapering plans. He suggests investors to use the current opportunity to realign their portfolio.

Also Read: Fed could up QE to USD 1 trillion a month: Marc Faber
Speaking to CNBC-TV18, Singh says the current market will not be led by any particular sector, but will be limited to a cluster of stocks. Below is the verbatim transcript of BP Singh’s interview on CNBC-TV18 Q: What is the sense you are getting from the market now? Are you full up on valuations and will further gains going to be tough?
A: It is going to be quite stock specific. The inflow on account of foreign institutional investor (FII) will sustain for a reasonably long time because now it looks like tapering has been postponed for sometime and you will see the next three-four months of stability on that particular front. However, the underlying economic fundamentals are definitely not supporting it.
In the past 15-20 days, the factors that supported are in terms of the results reported. Most of the corporates who were expected to report better results, have already reported.
A big chunk of them benefited on account of the rupee depreciation. Second half, where most companies are generally the most domestic business oriented companies, there some disappointment might creep in. This will result into the fact that there will not be a one way particular sector but the money keeps flowing in.
There is confusion in terms of what is going to lead, everything moves a bit and that is the kind of moment we will see in the index. So, we do not believe there will be one-two particular sectors leading it but it is going to be very concentrated in favour of few stocks in the index, which will continue to drive the market. Q: Even as we see day after day positive FII numbers, you see DIIs selling, are you also selling?
A: It is likely that we are getting some inflows and therefore, we are maintaining a percentage and so, we don’t have to sell. However, our portfolio is very conservative.
We are not getting carried away with the flow and we haven’t changed our mind that the economy has started booming. Infact we are seeing that it has provided a space to us whereby the asset allocations, whereby those corporates that are struggling because of the leverage, will get a chance to exit and sell the assets to the cash rich company and that is the theme that we are following in our portfolio.
We are carrying a conservative position, we are backing those corporates who are cash rich. The money is flowing in, there are cash rich companies that do not need money and the companies that need money are not getting the money. Therefore, there is no situation where one gets over confidence at this point in time because of the inflow, rather one will have to utilise this opportunity to realign the portfolio and this is exactly what we are doing.