Mumbai: Money managers may not raise their stock exposure significantly on valuation concerns but see the benchmark index rising in the next three months given ample global liquidity, a Reuters poll shows.
Six out of the seven fund houses who responded to the Reuters Asset Allocation Poll conducted between 22 July and 30 July said they plan to either retain or cut equity stakes.
Three of them said Indian shares were overvalued after surging more than 90% from 2009-low hit in early March, while others found it fairly valued. All but one fund house expect the index to climb up to 10% in three months.
“It all depends on global liquidity,” said Jayesh Shroff, a fund manager at SBI Funds Management.
The “world is too volatile still. We are changing every three months,” he added.
Foreign portfolio investors, key to India’s share market performance, have invested about $7 billion in 2009, powering a near 60% surge in the benchmark 30-share index.
The re-election of a Congress party lead coalition government with a decisive mandate and signs of economic recovery on back of government stimulus has helped sentiment.
Financials, Auto in Favour
But six firms said they will not cut cash levels in equity funds, given a sharp rally in shares, and rejig their portfolios in favour of relatively liquid large-cap shares from sectors such as auto, consumers, energy and financial services.
“It’s a period when we are not fully convinced that earnings are going to come through,” said I V Subramaniam, chief investment officer of Quantum Advisors Pvt Ltd, adding he saw selective opportunities in the financial sector.
Five of the seven poll respondents said they would raise exposure to financials in three months, boosting exposure to the most preferred sector of Indian funds industry which controlled 18% of diversified funds equity investments in June.
Four fund houses said they would raise bets on energy firms on hopes government might allow oil firms to charge market rates for their products and sell stakes in state-run firms.
A majority is also looking to buy auto and consumers shares given the resilience shown by them even in a slowing economy.
Motorcycle maker Hero Honda Motors beat forecasts with an 83% rise in June quarter profit, while top carmaker Maruti Suzuki reported an unexpected 25% jump in net profit.
India’s top cigarette maker ITC Ltd beat market forecasts with a 17.4% rise in net profit for the June quarter.
Bond fund managers are likely to maintain or cut their portfolio maturity fearing redemptions in longer-maturity fixed income funds on concerns a $90 billion government borrowing programme in 2009-10 will raise bond yields.