POLL-Stocks fairly valued, no major fund buying seen

MUMBAI, June 30 Wed Jun 30, 2010 5:02pm IST

MUMBAI, June 30 (Reuters) - Indian fund managers may not add much to their equity exposure in the next three months given the global uncertainties and rising valuations, a Reuters poll showed.

All eight respondents in the Reuters Asset Allocation Poll conducted between June 24 and June 29 said Indian equities are fairly valued and 80 percent said they would either stay neutral or cut their stock holdings.

"Upside potential from these levels looks limited," said I.V Subramaniam, chief investment officer of Quantum Advisors. India's benchmark 30-scrip BSE index .BSESN gained over 3 percent in June amid volatile market swayed by domestic factors like freeing up of petrol prices and hike in fuel prices and global factors on euro zone concerns and China's move to make its currency more flexible.

"It's nothing else but the global macro risk. I think the global macro has enough risks out there which will continue to induce volatility," said Tridib Pathak, director-equity at IDFC Asset Management.

Global economic worries have escalated after the U.S. Federal Reserve's comments last week sounded cautious about the economy while the Eurozone worries continue to linger.

In June, the benchmark BSE index has moved in a wide range of 16,318.39 to 17,919, low to high.

Foreign funds have bought shares worth $2.1 billion in June, after dumping $2 billion in May when the euro zone worries had dented risk appetite and sent the BSE index sliding 3.5 percent in the month.

All the eight fund managers polled said they see stock market moving up or down by up to 10 percent over the next three months.

About 50 percent of the fund managers polled plan to stick to their current allocation of equity.

ENERGY, ENGINEERING EYED However, energy and engineering shares are still an attractive investment, given the reforms pushed by the government in the sector.

Indian government freed-up state-subsidised petrol prices and raised prices of other fuels on June 25. The government also plans to free up diesel prices.

The financial of energy firms comprising both state-owned and private oil refiners and oil marketing companies would benefit on the move to free-up fuel prices.

Engineering firms continue to be a preferred sector with the fund managers as the 11th five-year plan backlog would accelerate spending in these sectors, experts said.

The money managers may also eye auto, auto ancillaries and consumer durable goods.

For the poll table, see [ID:nSGE65T0CT].

(Additional reporting by Nishant Kumar; Editing by Ramya Venugopal)

Reforms Push