The current boom in the stock markets notwithstanding, UTI AMC chairman R H Patil on Monday warned that "manipulation" was going on in trading of penny stocks and asked the investors to be careful about it.
"My real worry about the capital market is not large companies but the penny-stock companies...some manipulation is going on in that market," Patil told PTI in Mumbai.
Penny stocks is a term used to define cheaply available scrips of typically loss-making companies.
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UTI MF is the country's largest mutual fund and expects assets under management to rise to about Rs 30,000 crore (Rs 300 billion) by this fiscal-end.
High levels of profitability in a short period of time, on small investment, attracts investors to penny stocks, Patil said, adding: "everybody rushes in and the scamsters take away their money."
He warned, "one should be extremely careful." However, he remained bullish on the prospects of the markets, especially with regards to big companies, and inflows from FIIs.
"If things remain well with Indian economy, the money will continue to come," he said.
Observing that large Indian companies had immense scope for increase in profitability, Patil said the price-to-earnings ratio of such companies still gave scope for further appreciation.
"Today with increased profitability, the PE ratio is still not going up," he pointed out.
UTI AMC's chief investment officer A K Sridhar also remained bullish on the prospects of the market, though he expected some corrections in the short-term.
However, he said the returns from equities would be less than what they were earlier.
"On a three-year time-frame, we expect returns to be 3-4 times of the inflation rate," he said.
Asked to specify the sectors, which looked attractive, Sridhar listed out infrastructure companies like cement, engineering, power equipments, apart from pharma and banking.
On expectations ahead of the earnings season, he said they expected a 15 per cent growth in corporate earnings, except for the petro sector.
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