There is a genuine probability of volatility rising, is the word coming in from Leo Puri, MD of UTI AMC. He believes it is imperative that both the Reserve Bank and the government demonstrate commitment with regard to monetary policy and reforms respectively.
"I think if we can prove to the world that we have an RBI that can make independent decisions on monetary policy and safeguard our macro economic strength and at the same time have a government that is committed to policy reforms and getting the investment cycle going we will continue to be differentiated compared to many other markets," he told CNBC-TV18.
Below is the verbatim transcript of Leo Puri's interview with Manasvi Ghelani on CNBC-TV18.
Q: Where do you see the market heading from here?
A: I think there is a genuine probability of volatility rising as we are seeing even now. I think global markets will remain somewhat unsettled and therefore it is very important that India supports its own policies in terms of both demonstrating a commitment to reform and in terms of the RBI continuing to act independently as regards monetary policy. I think if we can prove to the world that we have an RBI that can make independent decisions on monetary policy and safeguard our macro economic strength and at the same time have a government that is committed to policy reforms and getting the investment cycle going we will continue to be differentiated compared to many other markets.
Q: If all that is taken care of, analysts believe that we could reach 10,000 levels. Do you agree to that?
A: I am not a big fan of setting these sorts of levels but we have a chance of getting back to that 7 percent plus gross domestic product (GDP) growth number and that in turn will support earnings expansion assuming very importantly investment cycle kicks in. There is very little room for complacency here, I would be careful.
Q: Would your sectoral bets change in any manner or would you stick to banking or would you have any sectoral changes that are coming up the way things are headed?
A: We generally look at stocks and not sectors. I think that is the important difference. However, in general if you see investment cycle kick in then certainly you will see the entire - whether it is infra and banks continuing their recovery at least the better stocks among them or consumer and IT continuing to grow as they have been, I think that will continue to happen. However, the important point here is we have an opportunity that we haven't had in 10 years to differentiate ourselves relative to the rest of the world and we must get it right in terms of both continuing policy reforms and having strong independent macro economic and monetary policy. Those are the two pillars on which we can differentiate ourselves relative to most markets.
Q: Early November when I had spoken to you, you mentioned that on the IPO bit you were expecting some sort of update by early December. Anything you have heard from finance ministry and post that how long do you think the process will take?
A: Second question is easy to answer; it should not take more than six months in our view from the time we get approval. I continue to believe that it is the right thing for UTI to be a listed board governed entity and I am quite certain that we will hear very soon in terms of the ministry of finance thinking on that topic. As soon as we hear we are ready to move.
Q: So far you haven't heard anything?
A: Discussions keep happening but we are not far away from having a resolution on that discussion.
Q: What are your expectations on the industry as a whole from the upcoming Budget, anything that you are looking forward to in it?
A: Something that would help the mutual fund retirement plan get off the ground. There is a need for harmonisation across insurance, pension and mutual fund industries – PFRDA, IRDA, Sebi in terms of harmonisation of tax laws on how we will develop long-term savings. I think that will give a tremendous boost to mutual funds as well as other sectors like insurance and pensions in the industry. So, we look forward to that.
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