Mutual fund managers trapped by swing
A senior fund manager expecting the markets to rise after the interest rate cut, but did not see the Sensex touching a new high.
By TNN |
A senior fund manager of a prominent fund house was expecting the markets to rise post the interest rate cut by the Fed. However, one thing that he had not bargained for was that moments after the opening bell rang, the Sensex would touch an all-time new high at 16K levels. What surprised him further was the fact that the markets maintained their momentum through the day, gaining over 600 points - only the second time that has happened - and closing at a new peak of 16,322.
While the markets appear to be gaining confidence once again, this fund manager is skeptical about the future of this rally. "It is difficult to predict the markets at current levels", he said. "While a hope for more influx of money into the markets, post the Fed rate cut, has led to a rise in stock prices, the market may continue to remain volatile amidst fears of the US economy entering into a recessionary phase."
But not everyone in the mutual fund land feels the same way. JM Financial CIO Sandip Sabharwal feels that markets are looking positive at these levels and is not anticipating any major corrections from here.
Clearly domestic fund managers seem to be divided in their opinion on the markets, with both sides having enough arguments to back their bullish or bearish viewpoint, as the case may be.
Amongst those in the camp who have reserved their concerns on this rally is Birla Sun Life Mutual Fund CIO A Balasubramanian, who feels that while the overall market is buoyant, corrections could be just around the corner given the sensitive political situation and concerns on corporate performance.
Mr Balasubramanian anticipates a correction of 10% from current levels, probably in mid-October, once corporate earnings for the second quarter come in. Sharing his view is R Rajagopal, CIO at DBS Chola, who believed that markets could continue to remain volatile mainly due to concerns arising from corporate earnings.
However, Kotak Asset Management CEO Sandesh Kirkire believes that this could just be the beginning of another big upward move. Mr Kirkire believes that the liquidity surge on the back of the rate cut would ensure that positives continue to flow. Though he does not rule out small short-term corrections, he thinks that these would be opportunities to buy rather than a cause for panic.
Echoing Mr Kirkire’s view are Lotus India Asset Management CEO Ajay Bagga and SBI Mutual Fund CIO Sanjay Sinha, who are bullish on the markets. Though Mr Bagga expects some volatility induced by global factors he accepts that these would be temporary. Mr Sinha believes that lower interest rates would help revive consumption demand which, in turn, would provide a fresh impetus to the market.
However, both sides tend to be in agreement when it comes to which sectors they would be buying into. These include sectors like auto, real estate, FMCG, banking, infrastructure and retail. That said, it is unlikely that most funds would buy heavily as they are fully invested already and cash levels are at a minimum.
The mood of the equity fund managers is more than matched by those of debt funds who also think they are finally back in business. Debt fund managers that ET spoke to were unanimous that interest rates are definitely headed downwards. Ritesh Jain, who heads fixed income at Kotak, expects rates to come down by around 20-30 basis points over the next three months and advises investors to look at short and medium term debt funds.
Sandeep Bagla at AIG is even more bullish and expects a full percentage point cut in rates over a year. Mr Bagla’s advice to investors is the same as that Mr Jain has to offer and further adds that investors can safely avoid FMP’s.
While the markets appear to be gaining confidence once again, this fund manager is skeptical about the future of this rally. "It is difficult to predict the markets at current levels", he said. "While a hope for more influx of money into the markets, post the Fed rate cut, has led to a rise in stock prices, the market may continue to remain volatile amidst fears of the US economy entering into a recessionary phase."
But not everyone in the mutual fund land feels the same way. JM Financial CIO Sandip Sabharwal feels that markets are looking positive at these levels and is not anticipating any major corrections from here.
Clearly domestic fund managers seem to be divided in their opinion on the markets, with both sides having enough arguments to back their bullish or bearish viewpoint, as the case may be.
Amongst those in the camp who have reserved their concerns on this rally is Birla Sun Life Mutual Fund CIO A Balasubramanian, who feels that while the overall market is buoyant, corrections could be just around the corner given the sensitive political situation and concerns on corporate performance.
Mr Balasubramanian anticipates a correction of 10% from current levels, probably in mid-October, once corporate earnings for the second quarter come in. Sharing his view is R Rajagopal, CIO at DBS Chola, who believed that markets could continue to remain volatile mainly due to concerns arising from corporate earnings.
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However, Kotak Asset Management CEO Sandesh Kirkire believes that this could just be the beginning of another big upward move. Mr Kirkire believes that the liquidity surge on the back of the rate cut would ensure that positives continue to flow. Though he does not rule out small short-term corrections, he thinks that these would be opportunities to buy rather than a cause for panic.
Echoing Mr Kirkire’s view are Lotus India Asset Management CEO Ajay Bagga and SBI Mutual Fund CIO Sanjay Sinha, who are bullish on the markets. Though Mr Bagga expects some volatility induced by global factors he accepts that these would be temporary. Mr Sinha believes that lower interest rates would help revive consumption demand which, in turn, would provide a fresh impetus to the market.
However, both sides tend to be in agreement when it comes to which sectors they would be buying into. These include sectors like auto, real estate, FMCG, banking, infrastructure and retail. That said, it is unlikely that most funds would buy heavily as they are fully invested already and cash levels are at a minimum.
The mood of the equity fund managers is more than matched by those of debt funds who also think they are finally back in business. Debt fund managers that ET spoke to were unanimous that interest rates are definitely headed downwards. Ritesh Jain, who heads fixed income at Kotak, expects rates to come down by around 20-30 basis points over the next three months and advises investors to look at short and medium term debt funds.
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Sandeep Bagla at AIG is even more bullish and expects a full percentage point cut in rates over a year. Mr Bagla’s advice to investors is the same as that Mr Jain has to offer and further adds that investors can safely avoid FMP’s.
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