Interview Jimmy. A. Patel

Weak corporate results have sparked a series of downgrades. Coupled with rising inflationary pressures and interest rates, widely expected hike

in fuel prices, uncertainties in domestic political theatre and lack of governance, nothing is going the investors way.

Equities have been reeling from lack of FII inflows and negative global cues. The volatile stock market and persisting inflation concerns have forced investors to flock to gold and silver and the action has shifted to commodities, although even silver has come off lately. Jimmy. A. Patel , CEO, Quantum Asset Management Company Pvt Ltd gives his readings of equities and bullion.

Whatalt39s your call on equities on a macro perspective?

The equity markets looked up in 2010, even though there were a few matters of concern across the world, especially inflation. On a macro view, equity markets have the potential to perform much better in FY 11 – FY 12 but could remain uncertain in the first few months due to factors like inflation, currency debasement, tight bank liquidity etc. Along with this, we have witnessed acceleration in tightening of rates by the Reserve Bank of India ( RBI) in the recent past which could affect the market. We however, stay bullish on our outlook of the equity markets and expect to see the share prices head upwards over the long term.

The GDP growth is projected to be in excess of 8% for fiscal year 2010- 2011, and is likely to be approximately 7.5% in year 2011- 12. If countryalt39s GDP growth is strong in FY 11 – FY 12; corporate profits will automatically look strong which will also be an important facet of equity markets.

Add to this, if monsoons are good this year ( which we hope they are), and the Indian working class continues to progress with income security, it is quite possible that the Indian growth story will be encouraging.

With gold funds being the new craze, have equities taken a backseat?

Equity and gold are separate asset classes. Equity funds aim towards capital appreciation over the long term while gold funds should be added to the portfolio to hedge your investments.

It is encouraging to note that the Indian investor is slowly getting comfortable with investing in gold through the mutual fund route, instead of traditional methods like purchasing physical gold. With factors like inflation and financial uncertainty, gold has become a safe haven asset and it is not surprising that gold prices have sky rocketed, as investors flock to buy gold.

If one plans to invest in equity however, italt39s important that they look at diversified equity funds which have invested in various sectors so your risk is greatly reduced.

Off late, equity mutual funds have outperformed the markets. What is your view on the same?

Nothing attracts investors more than a fund with a great record, especially in times of marketalt39s bleak performance.

One should understand that not all mutual funds will be able to outperform their benchmark all the time.

For a mutual fund to outperform its benchmark; the performance should be consistent, expense ratio and expenses need to be low, and the fund should follow a sensible, risk- adjusted research and investment process. Investors should not go by ratings of the mutual fund since they only represent the past performance and cannot predict the future.

And the key to reaping benefits out of your mutual fund investment is to stay invested over the long term.

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