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Hard To Forecast

Find out what one of India's most dynamic fund managers, Prashant Jain feels about the Indian market and how he ensures that his funds remain top performers year after year

Jain is one of the most revered fund managers, known for his astute stock picking abilities. All his funds are five-star rated, be it equity or balanced. The impressive list includes HDFC Equity, HDFC Prudence and HDFC MIP Long Term.Jain worked for two years with SBI Mutual Fund before joining Zurich India AMC. In 2003, HDFC Mutual Fund took over and he has been with the fund house ever since. An engineer from IIT, he holds an MBA from IIM.

Do you see a market crash in the near future?
In my opinion, a “crash” is probably too strong a word for the Indian market. But a correction can never be ruled out. It is true that the Indian market is somewhat expensive, but it offers a unique combination of size and growth. Global investors are increasingly looking at India as a mainline asset class and are therefore, investing with a long term view. If you look at Indian P/E's of nearly 20, 15-20 per cent earnings growth, interest rates of 4-6 per cent prevailing outside India and an appreciating currency, then Indian P/E's still look reasonable. India is somewhat expensive compared to the past and to the prevailing interest rates locally. But when viewed in the global context and in view of improved size, fundamentals and visibility of the Indian economy, the market does not appear to be unreasonably valued.

What is the strategic and tactical orientation of your fund?
We refrain from taking significant cash calls, as we believe investors are doing the asset allocation at their end. Further, it is extremely difficult to time the markets. For instance, early 2000, when the market was at a peak, the cash levels in funds were extremely low. But in September 2001, when the market was at the bottom, cash levels were higher.In view of the above and the attractive medium to long-term outlook of equities, HDFC Equity Fund continues to remain nearly fully invested.

In the case of HDFC Prudence, the fund has been overweight on equities since 1999. The exposure to equities is between 70-75 per cent and the rest is in bonds. One change that has been done in the last six months is that the maturity of the fixed income portfolio has been increased. This is because the risk reward equation of long maturity bonds is favorable.

Which are your top sector preferences?
Both funds are overweight on capital goods, banking, media and FMCG stocks. The Equity Fund has a lesser exposure to mid caps than Prudence.