26 Jun, 2008, 1241 hrs IST, REUTERS
MUMBAI: Mutual fund managers are looking to trim cash levels and deploy money into shares after the stock market contracted by a third this year, according to a poll by Reuters.
Fund managers, who had been sitting on double digit cash levels amid the 30 percent slide in the benchmark index, expect stocks to recover in the coming quarter, the poll showed.
Seven of eight respondents in the Reuters Asset Allocation Poll conducted during June 23-25 said shares would gain 5 percent or more in the next three months. "If you look at it from a long perspective of three to five years, it's a great great time to buy," Tridib Pathak, chief investment officer of Lotus India Asset Management, said.
"Overall market valuations are quite attractive. The India story does not change in a matter of three four months," Pathak, who held 5-11 percent of the portfolio as cash in four of his stock funds at May-end, said. The one year forward price-to-earnings of the BSE index, which rose above 21 in January, has since fallen to 13.7.
The market should see positive swings from third week of July as earnings remain strong in view of robust advance tax collection and a good monsoon, R K Gupta, managing director of Taurus Asset Management, said. Companies paid 306.55 billion rupees as taxes this fiscal year until June 21, up 39.81 percent from a year-ago, the finance ministry said on Wednesday. "Below 14,000 selective buying will come... I think further downside is restricted," Gupta said.
SECTORAL BETS
Large-cap stocks are in favour with nearly 90 percent of the poll respondents, while half of them said they are not averse to buying relatively illiquid mid-cap stocks.
Financial and engineering shares, which have undergone sharp falls and seen popularity wane this year, are back on their radar with half of the respondents looking to raise exposure in the two sectors.
"Banking we are bullish because we find valuations to be extremely attractive," said Pathak of Lotus Mutual Fund. Financial stocks have tumbled more than 40 percent on expectations of monetary tightening by the central bank on spiralling inflation, bringing the price to book value of many state-run banks below one, which fund managers see as attractive.
Engineering stocks, also down more than 40 percent, have fallen more than warranted and should bounce back strongly as market recover, Jayesh Shroff, fund manager at SBI Funds Management, said. "The companies still have robust order books.
The margins will definitely be under pressure but it would not be as significant as the market is expecting or their prices suggest," he told Reuters. Half of the poll respondents are also looking to raise exposure to services stocks and defensive sectors such as consumer goods and healthcare in the next three months. A fourth of them said they would allocate more money to stocks in their balanced funds portfolios.
SECTORAL BETS
Large-cap stocks are in favour with nearly 90 percent of the poll respondents, while half of them said they are not averse to buying relatively illiquid mid-cap stocks.
Financial and engineering shares, which have undergone sharp falls and seen popularity wane this year, are back on their radar with half of the respondents looking to raise exposure in the two sectors.
"Banking we are bullish because we find valuations to be extremely attractive," said Pathak of Lotus Mutual Fund. Financial stocks have tumbled more than 40 percent on expectations of monetary tightening by the central bank on spiralling inflation, bringing the price to book value of many state-run banks below one, which fund managers see as attractive.
Engineering stocks, also down more than 40 percent, have fallen more than warranted and should bounce back strongly as market recover, Jayesh Shroff, fund manager at SBI Funds Management, said. "The companies still have robust order books.
The margins will definitely be under pressure but it would not be as significant as the market is expecting or their prices suggest," he told Reuters. Half of the poll respondents are also looking to raise exposure to services stocks and defensive sectors such as consumer goods and healthcare in the next three months. A fourth of them said they would allocate more money to stocks in their balanced funds portfolios.
Source: ET
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