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S N Rajan, CIO, Kotak Mahindra Mutual Fund, comments on the market outlook

''We see a 15% downside from current levels"

The Indian market will continue to move in line with Nasdaq, believes S N Rajan, chief investment officer of Kotak Mahindra Mutual Fund. Rajan continues to be bullish on the infotech sector despite the sharp correction in the prices of technology stocks.

Q.Going forward, where do you see the market in the medium-term?
Rajan: The market in the medium term will be largely influenced by the behaviour of the Nasdaq. The possible downside we are looking at is around 15 % from current levels.

Q. The current market is fund manager's delight as well as dilemma since prices appear attractive across-the-board. Which are the sectors you are looking at and why?
Rajan: Our allocation to various sectors remains the same as before and changes in prices have not made us to look at a different set of stocks.

Q. Technology stocks again have come down to reasonable levels though PE ratios are still high by conventional standards. Do you feel the sector will again steal a march over cyclical and FMCG stocks if the markets take off?
Rajan: The levels of growth expected in the technology sector is unmatched by other sectors and hence one would tend to be overweight on the sector. However, stock valuations are largely influenced by the sentiment and FII inflows into the country. Hence the sector will outperform other sectors but one must not forget that the downside is also equally high if the overall market is bearish.

Q. In your balanced fund, around 30 per cent of the corpus is in call and gilts while the equity component has fallen below 50 per cent. Do you intend to increase the equity exposure or aim to maintain a 51:49 allocation?
Rajan: Our average allocation to equity in the balance fund is 55 % and the range varies from 50 to 60 %. We will continue with this pattern.

Q. Do you see disinvestment finally taking off with the Air India proposal getting cabinet nod?
Rajan: Any disinvestment of ownership without management control will not be viewed very positively.