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Time ripe for value-investing

Nilanjan Dey

THERE are tell-tale signs of equity funds gearing up to tap attractive valuations of stocks this week. It is to be seen whether the process gets accelerated by the Budget or slackened, till it is time for the next upsurge.

The mainstream funds, one expects, would continue to diversify even after the Budget, and try to withstand whatever correction that might happen in volatile sectors such as media and technology. Some of them would, perhaps, continue to hold comfortable l evels of cash.

MFs would do well to stay prepared for opportunities that may arise due to disinvestment in PSUs. This would call for constant vigil and proactive re-balancing of portfolios. As always, corporate trends, especially in profit and valuation, would be the g uiding factors.

It is to be seen how the Budget impacts the cyclical segments. A boost to infrastructure, eagerly awaited by all sections of the market, could send out a positive signal for core sectors such as cement, steel, power and construction.

In the backdrop of attractive valuations, the key to wealth would be in proper stock picking. A typical fund manager would do well to invest in growth segments at this juncture. Those who seek value should stretch their effort at identifying bargains, ba sed on fundamentals.

On the debt side, fund managers have noticed that rates are declining all over. Most of them expect the central bank to follow an easy monetary strategy with some inclination towards moderate interest rates. MFs, in order to secure best returns, are expe cted to adjust portfolio maturity across their debt products.

Also, MFs will have to live with the possibility of declining credit demand over the short term. For them, the other important considerations will be fiscal deficit, slow credit offtake and a comfortable foreign exchange scenario.

In the emerging scenario, funds expect the Reserve Bank of India to go in for raising resources at reasonable rates. As the largest borrower, the Government is expected to benefit from the lower rates of interest.

It is heartening to see the way MFs are working towards mobilising more for their liquid products. Dundee has tied up with ABN-Amro Bank to announce a `liquidity sweep' facility, complete with cheque writing. Dundee Liquidity Fund is `AAA'-rated.

On the new launch front, Franklin India Index Tax Fund opens for subscription on February 26. SBI MF has announced an MIP. As for dividends, pay-outs have been lined up by a number of funds.

In recent times, a section of MFs have shown an inclination to show off prizes and awards that various agencies have presented to them. This is reflected in some of their advertisements. A word of caution. Investors must not allow these to cloud their ju dgement. All factors must be considered before the final decision.

Meanwhile, as transaction trends for the month (up to February 21) show, gross purchases of equity funds trailed gross sales by Rs 1,149.59 crore. However, gross purchases of debt funds were more than gross sales by Rs 417.62 crore.

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