Chief investment officer of Cholamandalam MF, Tridib Pathak, thinks that this correction is healthy. The fund house is investing in stocks from a longer-run perspective. According to him, this correction has created a huge amount of opportunities to buy.
Excerpts from CNBC - TV18's exclusive interview with Tridib Pathak:
There has been much talk about how mutual funds are seeing redemption pressures and they had been booking profits. Give us a sense of what is really happening and what you are doing at Cholamandalam?
As an entity, we have not seen much large redemptions at all. What we are advising investors is the fact that this is a correction, which was required. It is healthy. We are in a market, which has gone up 60 per cent per annum over the last three years before the correction happened. Now, we have just seen a 30 per cent correction. So this is what the equity markets are all about. They are volatile and markets do go down.
Are you not churning your portfolio at this point and if you are, what are you really looking at buying at these levels and what have you pulled out from?
We are investing in stocks more from a longer-run perspective. If we find a stock, which is undervalued, we stick on to it even though it may have fallen in the correction.
Having said that, yes this correction has also created a huge amount of opportunities, a lot of stocks which we have been eyeing upon, were a little expensive are now in the undervalued zone.
Certainly, we are using this opportunity to reconstruct and to a certain extent rejuvenate our portfolio.
How much cash do mutual funds have right now to be able to exercise this buying opportunity?
I do not know about the industry figures because it is very difficult to say that at this moment unless one knows the month-end figures. We never know what is the amount of cash lying in the system at any particular point of the day.
But presumably a large amount of cash that was there a few months back has got invested, which came through NFOs. So far as using this opportunity is concerned, one can always move out of one stock and move into another stock because a lot of things have happened in the market over the last one month. This has made relative value attractive in many of the stocks.
Give us some stock ideas that you do like at these levels and the sectors?
As a matter of policy and regulation, we are not allowed to talk about individual stocks.
Can you talk about the sectors that you are bullish on, given the kind of correction that you have seen?
On a broader basis, we are overweight on banking, IT services, and cement.
Overall in terms of redemptions or booking profits, what would the strategy be? How midcap funds, sectoral funds would be played at Cholamandalam?
We do not need to respond to week-to-week or month-to-month rises or falls in market prices. We believe in stock selection and we just focus on that.
Obviously a market moving up and down does create opportunities and we keep watching that on the regular basis. So I do not think there is anything extra circumstantial in this correction, which changes one's normal way of investment philosophy, which is basically focusing on stocks, which are available at attractive valuations.
Keeping in mind the kind of volatility we are seeing at this point of time, would it not call for a frequent churning to take advantage of the volatility? In that light, are you looking at changing your strategy in any way?
No, the change in strategy is only towards positioning yourself in those stocks, which were not available cheap but now are available at extremely good valuations.
Going forward, what's your perspective on the markets right now? Could you also give us some insight as to what are those sectors from the midcap space essentially that you would try and tap on?
In midcap, we as a house, never really concentrated on sectoral investing. We have our own filters and we have our own way of selecting midcap stocks. The advise to investors would be that, when one is looking at midcap per se, it is essentially a long term investing of three-five years because one is trying to invest in companies, which have the potential to become much larger corporates.
It could happen in 3-6 months time or 12 months time. So we are continuing to focus on that, so we will keep on selecting stocks, which we think can become big large cap companies as one go forward.For more such reports, log on to www.moneycontrol.com