Fund managers in India expect equity markets to remain range-bound in the near term with the economy slowing down and weak cues emanating from the international markets. However, some of the fund managers, believe that at current juncture Indian equity indices are trading at attractive valuations and investing at these levels could help earn ?better? returns over the medium term that is next 12-18 months.

Ritesh Jain, head investments at Canara Robeco MF says, ?Recently we have seen lot of correction in the Indian markets, but for markets to move up from this current levels we need some very positive news coming from global as well as domestic markets?. He, however, added that given the current scenario

it seems very unlikely and therefore markets are likely to remain in the current range for the next few months.?

However, it will be completely a stock picker market in the next 6 months? he said. Foreign investors who are currently underweight on India are looking closely at the winter session of the parliament which might pass some important bills. Currently, they are really worried about the pace of reforms, said a fund manager.

Even after the recent downfall, Indian equity markets are looking expensive on a relative basis leading to its underweight position among emerging market funds.

As per bloomberg data, while Sensex is quoting at a one year forward price to earning ratio of 13.5, Russian Micex is quiting at 4.2, Brazil Bovespa at 8.7, Shangha SE composite at 10.7 and South Korean Kospi at 8.3.

Fund managers feel that this is the right time for the investors to continue their investments in equity markets and feel that government should bring in some strong policy action on the infrastructure sector which has been under pressure since 2008.

The view of most of the fund managers is that currently market is trading at attractive levels ? trading at about 13-14 times one year forward earnings. Swati Kulkarni, executive vice president and fund manager at UTI MF says, ?The valuations currently are quite attractive and investors coming in for atleast 2 year horizon is likely to make good returns. However in the days to come, volatility is likely to continue in the markets given the global as well as domestic factors. Some short term concerns like growth slowing down from 8% to 7%, might also impact the equity markets.?

As regards the portfolio strategy, some managers are slowly and steadily hiking their exposure in banking sectors as they feel that interest rates have more or less peaked-out. ?We are still not overweight, but we are buying into some bank stocks as valuations are attractive,? added Kulkarni. However with no clear direction from the global markets and fear of slowdown in the Indian economy, many fund managers are still sticking with defensive sectors like Pharma, healthcare and fast moving consumer goods (FMCG).

“We are not taking any cash calls right now and adding some FMCG stocks in the portfolio,? added Jain. European debt crisis remain a major cause of worry for the Indian fund managers, ?The Europe crisis is not yet over and we might witness some periodic shocks to continue.? said a fund manager from the leading fund house.