‘MFs prefer equity funds for better returns in next quarter’

Our Markets Bureau

Mumbai, Aug 10: Mutual fund managers feel equity funds would give better returns than debt funds during the next quarter ending September 2001, says a survey conducted by myiris.com on speaking to 25 fund managers, representing 17 fund houses that collectively manage over Rs 25,000 crore of assets.

Nearly half of the fund managers questioned believed that equity funds would post higher returns over the next quarter and majority of them said that debt funds would be showing lower returns. Debt funds like income and gilt funds have been giving high returns in the range of 20 to 30 per cent in the last quarter and currently account for the bulk of the inflows.

However, fund managers were divided on whether they would be able to beat their benchmark indices. A significant 40 per cent felt that beating the indices would be harder than before. The Sensex target for most of them is 3000-3500 over the next quarter, with the more optimistic among them seeing the index in the range of 3500-4000.

Inevitably, the fund managers are cautiously optimistic about the short-term performance of the equity markets, but are a little more pessimistic about the economy.

When asked about the relative performance of debt and equity, 72 per cent of the fund managers polled said that equities would offer the best returns over the next quarter, only 16 per cent said bonds would do better, while 12 per cent were not sure.

Within equity, fund managers were most bullish about cyclicals, with 44 per cent saying that they were positive on cyclicals. Out of this, 20 per cent were bullish on TMT, 16 per cent on FMCG and 12 per cent on pharma.

However, fund managers were divided on their opinion on the ICE sector. When questioned on which sector they were most bearish, as many as 44 per cent mentioned TMT.

Value and growth stocks are back in vogue with 40 per cent of fund managers saying that they are chasing value stocks, while another 36 per cent said that they prefer growth stocks.

Though the industry has been talking darkly about a slowdown, fund managers do not expect any major surprises. Some 44 per cent of them expect a slight improvement in corporate profitability while another 24 per cent expect no change.

At the exports front, about 40 per cent of those surveyed see a small increase and another 28 per cent a decrease while the rest were not sure. The growth expectations of the economy for the quarter are however, low : 84 per cent of fund managers said that the economy would grow 5 per cent or lower in the next quarter.

Regarding interest rates, a substantial majority of 68 per cent of the respondents said that US interest rates would be reduced marginally over the next quarter. However in India a majority of 76 per cent expect the interest rates to remain at current levels while only 12 per cent predicted lower interest rates.

Most fund managers (56 per cent) expect the rupee to weaken slightly or remain the same (36 per cent). The expected range is Rs 47.5 to Rs 48 to the dollar. They also fee that the worst is over for oil prices with 68 per cent saying that prices would be stable.

Meanwhile, as regards US-64 crisis, most fund managers around 44 per cent felt that, it would have a positive impact on them. A clear majority (72 per cent) of fund managers also felt that rolling settlements would not have a negative impact on them in the medium-term.