* 5 of 9 respondents plan to increase equity exposure
* Financials, basic/engineering among favoured sectors
* 5 of 9 managers see stock market rising over next 3
By Aditya Kalra
NEW DELHI, April 30 Domestic money managers
plan to further increase their exposure to equities in the next
three months, with financials and capital goods topping their
list of sector picks, a Reuters poll showed. [ID:SGE63T02V]
All nine respondents to the Reuters Asset Allocation Poll
conducted between April 20 and April 29 said Indian equities
are fairly valued at current levels, while five said they would
buy stocks and reduce their cash holdings
"The liquidity situation is pretty good and the FII flow
continues to remain robust," said Jayesh Shroff, fund manager
at SBI Mutual Fund.
"The second call I'm taking is that monsoon will be normal.
With normal monsoon, economy can see a significant pick-up."
The benchmark index climbed above 18,000 points earlier
this month, for first time since Feb 2008, largely on foreign
fund buying, although recent global worries on Greece and fear
of a contagion have eaten into some of the gains.
Foreign funds have invested a net of $6.3 billion in Indian
stocks in 2010, after pumping in a record $17.5 billion in
Global factors have "more of a sentimental impact on India
rather than fundamental," said Sanjay Sinha, chief executive at
L&T Mutual Fund.
Five of the nine fund managers see the stock market rising
further in the next three months, with two of them predicting
gains in excess of 5 percent. However, two respondents see the
Indian market falling more than 5 percent.
None of the respondents plan to increase their exposure to
small-cap stocks, but five managers said they would increase
mid-cap holdings while four favour raising their bets on
large-caps in their portfolios.
FINANCIALS, CAPITAL GOODS FAVOURITE
Financial services, the top bet of fund managers since
August 2008, will continue to be on the radar, with seven out
of nine managers looking at increasing their investments as two
of the top three banks have announced forecast-beating
"The results that have come out from especially private
sector banks so far have shown that the concern on asset
quality is not as much translating into actual NPAs as it was
feared to be," Shroff said.
Bank credit in India grew an annual 17.05 percent in early
April, according to the Reserve Bank's provisional data, and
analysts expect loan demand to pick up further in the first
half of 2010/11.
Indian banks trade at 12 times their one year-forward price
to earnings ratio, according to data from Thomson Reuters
StarMine which accords a higher weightage to analysts with a
better track record of predicting earnings.
That compares with 14.7 times for local shares.
Engineering and construction stocks will also be favoured
by managers, as the 11th five-year plan backlog would
accelerate spending in these sectors, experts said.
Six fund managers said they would increase their bets in
engineering and five said they will look at investing more in
Money managers may also eye technology stocks in the next
three months, the poll showed, with five of the nine
respondents looking at increasing their exposure to the sector.
Leading IT firms like Tata Consultancy Services beat profit
estimates, whereas Infosys met profit forecasts when they
declared their quarterly earnings earlier this month.
Some bond funds may increase their portfolio maturity in
the next three months, while balanced funds would look at
reducing their cash exposure, the poll showed.
(Editing by Tony Tharakan and Ramya Venugopal)