One or two quarters of volatility is okay: HSBC Asset

Last Updated: Mon, Jun 09, 2008 07:25 hrs

Mihir Vora is upbeat. His fundhouse’s flagship HSBC Equity fund-growth has been ranked No.21 among over 15,000 equity schemes worldwide. “We have been true to the label.

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The fund is diversified, large-cap biased and actively managed,” says Vora, who heads Equities team at HSBC Asset Management.

Explaining how the fund has been nimble-footed to short-term changes, Vora points out the IT sector allocation of the portfolio. In June 2007, the fund had 18% weightage to IT sector.

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Then seeing the adverse business environment, the weightage was reduced to 2% by December. Since then, conditions have improved for the business and valuations have become attractive due to the fall in prices. Therefore, the fund has increased exposure to around 9%.

Such active management has helped the scheme beat benchmark on the 5 year CAGR basis, says Vora.

Based in Mumbai, Mihir Vora is responsible for all equity investment activities of HSBC Investments in India. He joined HSBC Investments in 2006 and has over 12 years experience in fund management in the Indian mutual fund industry. Before joining HSBC Investments, Vora worked for ABN Amro Asset Management as the head – equities.

Prior to this, he was a fund manager at Prudential ICICI Asset Management and has held various positions at SBI Funds Management including fund manager, chief dealer and research. He holds a Bachelor’s degree in engineering (mechanical) from Maharaja Sayajirao University, a postgraduate diploma in management from the Indian Institute of Management, and is a CFA charterholder.

Vora spoke to N Sundaresha Subramanian about equity market developments and trends and his outlook for the markets.

How do you see the coming days for market?

One or two quarters of volatility is expected. Inflation is still ruling high and the oil prices are going to hurt for sometime.

Will the slowdown hurt?

We are talking of a cyclical slowdown. One quarter of slow growth after four good quarters. It will not hurt much. Structurally we are a growing economy. We have a sound current account and forex balances. We will continue to attract investors. In the nineties, capital was a problem. Availability of capital is not a problem anymore. Lower growth is fine.

What is your view on interest rates?

Interest rates will start tapering by the fourth quarter.

Do you expect them to rise before they taper?

No, I expect interest rates to stay stable and then start tapering. In the next few quarters, retail investors will find income funds as attractive as equity funds. As rates fall, bond funds will start doing well.

Fuel prices can’t be hiked endlessly, keeping inflation. But, if you don’t, the oil companies will face the brunt. What should you fix: the fuel prices or the inflation?

It’s obviously a mix of both. Inelasticity of crude demand to rising prices is the key. The point is that demand is coming from newer economies that are growing fast. Also crude has become a currency play and a hedge against weak dollar.

Does all this mean Indian market is no longer the preferred destination?

You can’t be the best performing market all the time. We are in the midst of a time consolidation, and that is healthy. On ground, nothing has changed in terms of overall story.

Are you holding cash?

We are holding around 15-20% in cash. We know which stocks to buy, but are waiting for attractive distress opportunities.

You must have been closely observing companies. Are you seeing anything peculiar in the corporate realm?

Everybody is facing attrition. That’s a common issue. Other thing is margin pressure due to rising input costs and interest rates. Third is the currency. Adverse movement in currency has been hurting both ways.

Exporters suffered while it went up. Now, when the rupee is depreciating lot of them have got into trouble because of the hedges they had got into. Currency has been a big irritant.

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Is there an end to this spiralling wages and mindless attrition?

All throughout the nineties, there was no additional capacity built. There was very little capex and very little hiring. So, when the sudden spurt happened after 2003, there was not enough second rung to get upgraded.

Nobody has the next line of managers to fill in when the seniors leave. The boom in middle-east has also taken away lot of workers and skilled labour.

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