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Jayesh Gandhi, Fund Manager, Birla Mutual Fund says that they have exposure to Allahabad Bank, IOB, PNB and Union Bank.
TP Raman, MD, Sundaram MF AMC believes that media as a sector looks interesting and that they have invested in the same.
Excerpts from CNBC-TV18's exclusive interview with TV Raman and Jayesh Gandhi:
What kind of investor mood have you witnessed, especially in July, post the carnage that we saw previously?
Gandhi: The action in the midcap space has been better. I see more trading volumes happening in midcap stocks. The risk appetite has actually improved now with the fear of higher interest rates slowly and steadily receding. So in terms of investor sentiment, I see positive development.
What has been your under performance relative to the Index over the last couple of months or three months since the correction happened because midcaps have corrected far more sharply than the largecaps?
Gandhi: I do not know about the last couple of months, but on a one-year basis, we have been able to outperform the benchmark, which has actually been positive for us. It was a difficult task in 2004-2005. But this year it has been better for us.
Have you faced any redemption pressures because of the under performance in the last three-months since midcaps have not been performing very well till a couple of days back?
Gandhi: No. In fact, we have seen some inflows into our midcap fund. Basically the size of the fund has remained more or less the same, if I may say that, it's been the same level. We haven't really seen any major outflows from the fund.
Could you tell us the performance of the midcap fund over the last 3-months relative to the rest of the Index in the market?
Raman: Even if you take a short-term basis of a week or a month, we have performed very well. In fact, we have beaten the Index, which is the BSE Midcap Index. It has given a return of 4.3% over the last one week.
There have been times of underperformance but I think, on the whole, the performance has been better than the Index. Apart from the long-term, it has given a decent performance in the near-term.
Some of your top holdings are from the real estate field like Ansal Properties & Infrastructure and Unitech. There have been sharp corrections in the real estate space, have you reconsidered your exposure to midcaps in the light of that?
Raman: We are constantly reviewing whatever exposures we have. But coming to real estate, our ability to spot this much ahead of the rally has been one of our unique strengths. So from that perspective and what the real estate story will be, going forward, will determine whether we will hold or exit the stock.
But right now, construction and real estate seems to be an interesting story. But the stocks in particular that you mentioned are much ahead of their rally.
Which are the sectors that you would continue to be bullish on, given the kind of earnings season that you have put behind you?
Gandhi: We like the banking sector. We believe in the interest rate tightening cycle ending globally and probably ending in India in the next 3-6 months. Banking stocks should better in the next one year.
We also like hotels stocks, we have decent exposure of hotel stocks in our midcap fund. We also like industrial and capital goods, which is another overweight in our midcaps funds, where names like
What is your exposure to a sector like sugar now, which has been the toast of the market in the last two days after a big correction?
Gandhi: We did not have significant exposure to sugar in the midcaps portfolio exposure, pre-correction as well. Currently, we have only small exposure into sugar stocks. Our exposure to sugar commodities has been very limited in the midcaps space. Hence, I guess we have been saved from the carnage as well.
We have seen the media pack also picking up speed over the last month or so, does that find favour in your fund?
Raman: Yes. The bottomline is that midcap is a stock specific story and so while segments and sectors do add value; identification of the growth sectors becomes an important part.
If one looks at midcaps and the way we have shifted stocks in midcaps, it all depends not only on the sectoral shifts, but also the individual stocks that to us have become appealing. Right now, media does look interesting to us, so we have put some money there.
Have you seen any money going into your funds because of the underperformance?
Raman: Yes, lots of it. On a daily basis, there have been regular consistent inflows into the midcap funds and particularly from the retail sector; there has been a significant interest in this fund, given its consistent and long-term performance.
You mentioned the capital goods stocks, which are there in your portfolio. In your last disclosed portfolio, what are the small PSU midcap banking stocks, which you may hold in your portfolio?
Gandhi: In terms of PSU banks, we hold stocks like Allahabad Bank, Indian Overseas Bank, Punjab National Bank and Union Bank. We have some exposure to Karnataka Bank, which is a private sector bank.
Could you give us an idea of how much you were in cash at the end of July and what is your strategy ahead? According to our information, Sundaram Rural was 54% in cash in July?
Raman: Sundaram Rural is a different story because it was a brand new fund, we got the money and we were set to invest, and then the markets went for a big fall, so we had to be careful in investing.
But coming to midcaps, right from the beginning the cash position has been anywhere from 25-26% to about 35% depending upon our view and what amount of cash we need to stay to pick up stocks that we want, or to prevent the downside. On an average, 30-31% has been the cash that we have been staying in.
What is your view on sugar; Bajaj Hindustan is one of your top five holdings in the midcap fund?
Raman: Sugar is a story we spotted fairly early and we are quite bullish on that sector and in fact it looks very interesting. We have quite a few sugar stocks in that fund.
Any smaller private sector banks that you have in your portfolio, apart from Karnataka Bank?
Gandhi: No, apart from that we have not taken exposure to any smaller private sector banks. My view has been that smaller private sector banks, now with the current competitive strength building in the PSU space, will find it difficult to grow as HDFC Bank and ICICI Bank did in their early days. It's going to be a tough call for some of the private sector banks now, than what the scene was 10 years ago.
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