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Virendra Verma
Neha Kapoor

Mr Gul Teckchandani, CIO, Sun F&C Asset Mgmt

THE stock market is much like life itself, an unpredictable play on probability and psychology. If it weren't, it would have been a science and everyone would have made money, says Mr Gul Teckchandani, Chief Investment Officer of Sun F&C Asset Management Company, a leading player in the mutual fund industry.

In an interview with Business Line, Mr Teckchandani says with low interest and inflation rates, comfortable reserves and good monsoon, all the ingredients for a good year for the financial markets are now ready. He feels software, media, auto and pharma sectors will do well in the coming months. Excerpts from the interview:

The year 2001 was ridden with uncertainties, for both India and the world at large. Terrorist attacks and stock market scams kept business environment sultry and financial markets depressed. What is your outlook for year 2002?

After all the uncertainty and volatility of last year, I think all the ingredients for a better year for the economy are now ready. Interest rates are low, inflation is low, our currency reserves are at a comfortable level, crude prices have fallen, we've had a good monsoon and food stocks are good. On the negative side, we are still battling with a huge fiscal deficit, software is no longer in fashion as it was in the first quarter of 2000.

Weighing the positives against the negatives, the investment environment in the country looks good. I feel the stock markets are ready to yield good returns this year.

After the software bubble burst, there are mixed views on the future growth of the sector. How do you see the sector performing this year? Also, will it remain a fashion investment in the stock market this year?

There is no questioning the fundamentals of the software industry...at least, of the top few companies. Their business models are stable and the sector will continue to do well. However, a lack of tangible assets makes it difficult to fix a value on technology companies.

At the end of the day, it is all about concept and perception. It does not help if people start disbelieving the concept. That's what is happening now and that's why I said software is not in fashion anymore in terms of investments in stocks. After all, the stock market, being a play on probability and psychology, is unpredictable. Much like life, really. And, if it weren't, then it would be a science and we'd all make money!

Having said that, I maintain that if you discipline yourself, there is money to be made in tech. What happened with technology stocks was that the logic came in much later unlike, say, cement or automotive stocks where the rationale moved in tandem with the market.

What sectors do you believe will be attractive for investment in equity this year?

This year I think software, media, automotive and pharma sector stocks should do well.

Last year the bond market did quite well. Do you expect the performance to continue through this year?

Bond markets did well last year on account of interest rate cuts, resulting in the rise in prices of debt instruments. I expect the market to remain buoyant till the Budget.

Why is that?

There is increasing pressure on the Government to reduce borrowings. This pressure is likely to result in lower interest rates on Public Provident Funds and postal savings. This could lead to a fall in overall interest rate, but not as sharp as last year. When that happens, debt instruments would become less attractive, making investments in equity more attractive.

In the changed economic scenario, what kind of returns do you expect equity to provide?

One thing to remember with equity is that it is a good long-term investment. Globally, it has been proved that in the long run, returns from equity will always be higher than that from any other form of investment. Then again, you have to define your appetite for the market much like you do when you sit down to eat! Taking into consideration the various macro-economic factors, I expect equities to deliver returns between 25 and 30 per cent.

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