Funds to raise mid-cap exposure, eye engineering shares

Fund managers plan to raise exposure to mid-cap stocks over the next three months while cutting down on large-caps.

Domestic managers, who see the market as fairly valued, expect it to rise further by up to 5%, backed by liquidity, according to a survey of eight fund managers.

“Liquidity will continue because of growing awareness of India as an investment destination and high GDP growth,” said Sanjay Sinha, chief executive officer of L&T Mutual Fund.

Five managers see a rise of up to 5% in the stock markets driven by liquidity.

The Bombay Stock Exchange Sensex has gained over 14% with foreigners pumping in about $18.2 billion this year till September 29. If the inflow is sustained till the year-end, it would be a record, beating the $17.5 billion invested in 2009.

Five of the respondents said they would increase exposure to equities, but cut down on large-cap stocks.

Six fund managers said they would raise exposure to engineering stocks as the onset of capex cycle will be the growth driver.
Engineering firms were the preferred sector as the government’s 11th Five Year Plan backlog would accelerate spending in this sector, they said.

“We feel that capex cycle will start playing out,” said Jayesh Shroff, fund manager at SBI Asset Management Co.

Five fund managers picked healthcare, saying they view it as a defensive buy, in case of any downward movement.

Some balanced funds, however, preferred to increase exposure in bonds and cut their holdings in equity. Reuters