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Fund Manager R.Sukumar, on trends in Technology and Pharma Sector.

"We plan to go on with our strategy of picking the best stocks. These stocks we hope will stand up irrespective of a tough market."

R Sukumar has been managing the Infotech and Internet Opportunities funds at Kothari Pioneer since inception. Sukumar is also the fund manager of pharma fund and a diversified equity fund, Prima Plus, which invests in large and mid cap stocks.

The KP-Infotech fund has been a stellar performer with a one-year return of 214 per cent as on June 30, 2000 while Internet Opportunities Fund, which was launched in March this year, has a delivered a return of (-) 13.4 per cent as technology stocks were battered. Sukumar does not see a broad base rally in IT stocks since most stocks are fundamentally too weak to hold on to even current prices. However, he expects an upsurge in the prices of few top-rung IT companies.

Q. Despite a strong first quarter showing by Infosys and Satyam, the results have failed to trigger a rally on the bourses. There seems to be a distinct lack of interest in the market for even top rung IT stocks. Do you feel that the market appetite for IT stocks is on low ebb?
Sukumar: Information technology stocks are consolidating after a strong upsurge last year. In the consolidation phase there will be a gradual shift to quality. Besides, many institutional investors are adequately/over weighted on the sector and incremental buying has slowed down. The speculative positions are also cause of concern and many new foreign institutional investors, who want to invest are concerned.

Q. But do you expect the trend to reverse once results from other IT majors are announced?
Sukumar: I don't think there will be a broad rally spanning most stocks in the IT sector. There are over 150 IT companies, which are listed on the bourses. Most of them are fundamentally too weak to sustain current prices. They need to fall sharply. Top rung stocks like Wipro and Infosys have potential to go up in the medium term as next quarter results come and the market is convinced about sustainability of earnings growth.

Q. What is your investment strategy in this market, which is essentially struggling to find direction?
Sukumar: We plan to go on with our strategy of picking the best stocks. These stocks we hope will stand up irrespective of a tough market.

Q. Where do you see the broad market headed in the medium-term?
Sukumar: I see the market moving up 15 to 20 per cent in one year's time based on fairly good-macro economic environment and steady fund flows from foreign and domestic investors.

Q The NAV of KP Pharma is hovering around the par level. Some of the top rung pharma stocks have been battered in the last six months. What is your outlook for the pharma sector? Do you expect a huge upside if the government were to liberalize price control?
Sukumar: I think the Pharma sector has seen the worst. The growth rates are improving and you will see better top line and bottom line growth for most companies in the sector. The excitement will continue to hover around companies like Reddy's and Cipla where there can be upside coming out of R&D efforts. DPCO relaxation has been delayed and there is no indication that the government is doing anything about it. In case, the government does decide to relax DPCO, there will be huge upside, particularly for MNC pharma companies like Hoechst and Glaxo.