Facing the risk of being labelled 'too cautious', the cash-laden mutual fund
industry wants to see more concrete evidence of a rally before taking a more firm call on the fate of the stock markets.
Investment officers of leading mutual funds seem to be less bullish of the rally post-elections than foreign institutions who are 'desperate' to deploy cash. MFs appear to have learnt a lesson from 2008 and say that they are focusing on large-caps and companies with good fundamentals, rather than bet on mid-caps and small-caps which fell faster in the ensuing sell-off. Exposure in equities as an asset class to the total market value of equity diversified funds has increased from 81% in March 2009 to 82.4% in April 2009 but going forward, perspective is the key. "If one bases their projection on fiscal 2010, there is hardly any value left. But if you look beyond 2010, the Indian economy seems more resilient. Many are awaiting earnings upgrades for companies. FIIs have a more long-term view while our domestic institutions have been more short-term focused," Seturam Iyer of Shinsei AMC said.
Monday's monster rally does not appear to have forced an immediate change in asset allocation strategies also. "This is more of a sentiment trigger as the uncertainty surrounding formation of government has gone. We will wait for events such as cabinet formation and the union budget (expected in 2 months). There has to be more concrete evidence before we re-look at stocks and sectors," Sameer Narayan, head of equities, Fortis Investments, said.
Equity experts at mutual funds are backing fundamentals over stock price gain. "Mid and small cap stocks had witnessed sharp declines over the last year or so. While in the short-term, increased risk appetite may lead to larger gains in mid and small cap stocks, over the long term, companies with good fundamentals are likely to do well irrespective of market cap ranges and sectors," Sukumar Rajah, CIO, equity, Franklin Templeton Investments, said.
Rather than remaining fully-invested, many mutual funds like Birla Sun Life which have kept 10-11% cash as compared to equity assets, want the freedom to invest if valuations are attractive.
industry wants to see more concrete evidence of a rally before taking a more firm call on the fate of the stock markets.
Investment officers of leading mutual funds seem to be less bullish of the rally post-elections than foreign institutions who are 'desperate' to deploy cash. MFs appear to have learnt a lesson from 2008 and say that they are focusing on large-caps and companies with good fundamentals, rather than bet on mid-caps and small-caps which fell faster in the ensuing sell-off. Exposure in equities as an asset class to the total market value of equity diversified funds has increased from 81% in March 2009 to 82.4% in April 2009 but going forward, perspective is the key. "If one bases their projection on fiscal 2010, there is hardly any value left. But if you look beyond 2010, the Indian economy seems more resilient. Many are awaiting earnings upgrades for companies. FIIs have a more long-term view while our domestic institutions have been more short-term focused," Seturam Iyer of Shinsei AMC said.
Monday's monster rally does not appear to have forced an immediate change in asset allocation strategies also. "This is more of a sentiment trigger as the uncertainty surrounding formation of government has gone. We will wait for events such as cabinet formation and the union budget (expected in 2 months). There has to be more concrete evidence before we re-look at stocks and sectors," Sameer Narayan, head of equities, Fortis Investments, said.
Equity experts at mutual funds are backing fundamentals over stock price gain. "Mid and small cap stocks had witnessed sharp declines over the last year or so. While in the short-term, increased risk appetite may lead to larger gains in mid and small cap stocks, over the long term, companies with good fundamentals are likely to do well irrespective of market cap ranges and sectors," Sukumar Rajah, CIO, equity, Franklin Templeton Investments, said.
Rather than remaining fully-invested, many mutual funds like Birla Sun Life which have kept 10-11% cash as compared to equity assets, want the freedom to invest if valuations are attractive.
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