Prashant Jain, Fund Manager at Zurich, on his outlook for technology sector.
"I believe that software stock valuations are now selectively attractive and in line with the underlying growth, it is now possible to make 50-100% in these stocks with a one year time frame"
By Research Desk | Sep 10, 2000
Zurich India Prudence from Zurich India Mutual Fund continues to be an impressive performer in the open-end balanced fund category. Unlike its aggressive peers, the fund has maintained a diversified portfolio with only 15 per cent exposure to the ICE sector. This has helped the fund withstand the carnage on the bourses and has lost only 10.45% in the last three months against the sector average decline of 20.5%.
Prashant Jain, who manages Zurich India Prudence, is now comfortable with the valuations in the market and is positive in his outlook for equities in the medium to long term.
Q. Do you think the market has bottomed out and where do you see the indices heading in the medium-term?
Prashant: In my opinion, with the severe correction in ICE stocks, a lot of risk in the market has gone. I am therefore much more comfortable with the equity markets, than say a few months back. I think the outlook is positive about equities in medium to long term though the short-term trend is unpredictable.
Q.The current market is a picture of delight and dilemma since its attractive across-the-board. Which are the sectors you are looking at these levels and why? Do you intend to up exposure to ICE stocks?
Prashant: I believe that software stock valuations are now selectively attractive and in line with the underlying growth, it is now possible to make 50-100% in these stocks with a one year time frame. However, the risk is also high - any slackening in growth rates and the loss can be huge. For instance, take the case of Mastek and BFL Software.
Q.Do you think cyclicals will see a sustained rally on the bourses (around 30 per cent of your total portfolio) bouncing back? Will the disinvestment process provide a trigger?
Prashant: The old economy stocks, where there is growth and valuations, are very attractive and should also do well. Besides, any concrete steps that the government takes on the disinvestment front can make a big difference.
Q.The FMCG stocks have also seen a brief rally on prediction of a normal monsoon. The pharma counters have also seen some brief spurts in the last one year. Are you bullish on the two sectors?
Prashant: The quality and sustainability of FMCG companies cannot be ignored. An investor should look at mid-cap FMCG companies but where profits are big or at least, the company has the potential to enter the big league. Else, these companies face the risk of being ignored. I am less positive on the pharma and MNC pharma companies since the growth is lower than software companies but the PE's are somewhat similar.