The Hindu Business Line : `No reason to think that growth will come under huge pressure very soon'

TAKE lessons from history, or else... ". Mr Sashi Krishnan, CEO of Cholamandalam MF, puts it pithily in reference to the issues that ultra short-term investors are currently grappling with.

He also shares with Business Line the MF's views with regard to the latest investing trends and new product launches.

Excerpts:

With the stock market where it is, can equities be labelled as expensive yet?

You can not exactly call them cheap, not when compared to what they were some time earlier. But those who are in the market for the long term should have no real reason to worry. However, if you are prone to take trading calls, you will have to be particularly alert.

An investor who wishes to time his entry and exit will not find the going too easy. That said, let me state that earnings growth will ultimately drive valuations. It has been a fairly good quarter - I mean the period ended June 30 - in terms of corporate earnings. There is no reason to think that growth will come under a huge pressure very soon.

Do you actually foresee major shifts from equity to fixed income?

It is difficult to say. Outflows may not be very significant yet. Those who have a firm view on the medium-to-long term prospects of equity will not go away in a hurry.

Some, I think, will feel the need to pull out of stocks because profit targets have been reached.

As for the immediate term, sentiments are strong and fresh money continues to come in from abroad. Every time that happens, the market moves up. This may encourage some people, typically short-term players, to consider staying back a bit longer.

Chola MF wanted to unveil a dynamic index fund...

Yes, we have SEBI's approval for it. For those who have invested in index funds, this will be one step forward. While I cannot tell you when it would be launched, it can be generally said that there are more takers for index-based investing today than before.

Let me add here that we would like to offer an ELSS. In the backdrop of Section 80C, it would make sense for investors. The three-year lock-in can be turned into an advantage if the stock selection is done correctly.

Right now we are doing a short-term floating rate product.

When floaters are not the market's main focus, why are you interested in such a product at this stage?

Well, there is considerable uncertainty on the interest rate front because of various reasons. There are difficult issues stemming from inflation, liquidity etc. The scheme will carry a portfolio characterised by low duration with an eye on mark-to-market risks. There will a 50 per cent allocation to floating rate instruments, with 150-200 days duration.

The basic idea is to protect investors from interest rate volatility. However, I agree that the space for short-term products is currently quite crowded.

Product launches keep on happening in the MF sector...

We will not launch a fund just for the sake of it. The schemes that we have come up with so far have each fulfilled a need. Take, for instance, our equity products.

The mid-cap fund meets a specific requirement. That reflects the policy we have generally followed.

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