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Virendra Verma
Neha Kapoor

MUMBAI, Sept. 2

IN conversation with Business Line, Mr Vetri Subramaniam, Head, Equity Funds, Kotak AMC, says the mood in the market is still pessimistic given the uncertainty of fund flows and unclear picture in the US.

Excerpts from the interview

What is your outlook for the equity market?

The equity market still does not have the legs to move up. No one seems to have the appetite for equity at present and money is simply not coming in, in spite of good valuations.

What is your investment strategy while buying stocks, especially in the IT sector?

Since last year, the stock markets have been falling, so we decided to keep ample cash (around 40 per cent) to invest at appropriate time after taking the permission of our unitholders.

For the IT sector, our focus has been on blue chip companies, as we believe that these are the only ones that will survive a shakeout. And, a shakeout is something that happens in every sector where the top few companies survive the difficult periods. As the IT industry matures, we want our portfolio to reflect that trend. Apart from blue chips, we do maintain a small focus on other IT companies, which are niche players.

In last two-three months, there was a rally in mid-cap stocks . What do you foresee for these stocks?

The mid-cap rally was an unusual phenomenon not only here but also across the world. Mid-cap index in the US, for example, hit its all time high in May-June at a time when the Dow Jones Industrial Average fell by 55 to 60 per cent. At that time blue chips and mid-caps pulled in opposite directions, both in the US and India, much like a rubber band. Today the blue chips have recovered while the mid-caps are still reeling. So, now the mid-cap mantra has fallen by the wayside.

Kotak has a fund, which focus on investments in MNC only. What are your views on the delisting trend?

Delisting or listing of shares is a broader issue that should be handled at the policy level i.e. the Government should decide on some policy guidelines that differentiate between a company that allows people to participate in its capital and one that does not. There should be a clear demarcation of what the advantages that listed company would enjoy as compared to an unlisted one.

A lot of funds have launched Index funds recently. How do you see them faring in the Indian market?

An index should ideally be a true reflector of a market. In India we don't have funds based on indices that truly reflect the markets. A Sensex or Nifty is poor reflector as it mirrors only the performance of blue chips. If you look at the US, an S&P 500 is a good reflector of the entire market as it has blue chips as well as mid-caps.

An index being a proxy for the whole market, index funds will make sense where you can create a structure that is based on say, the BSE-200. But the problem there is that the index would contain too many illiquid mid-cap stocks.

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