What will be the effect of rising oil prices on the economy?  

Unlike the 90s, the current economic growth has resulted in burgeoning forex reserves, which have helped cushion the impact of surging global oil prices. The government has absorbed part of this rise through reduction in excise duties and by restraining the pricing flexibility of state-run oil companies. If oil prices continue to stay high for a sustained period of time, we expect the resulting increase in inflationary pressure to impact demand in the economy. 

With the market having fallen 500 points, is this the bottom of the market?  

One cannot speculate on the levels of the market from a short term perspective. Volatility is fact of life in stock markets and one should not get perturbed by this. As always we believe that markets will reflect the fundamentals (both on the economic and corporate fronts) over the medium to long term.  

Will implementation of VAT be helpful in long run?  

We believe that introduction of VAT is a long term structural positive as it will improve the tax to GDP ratio by bring in broadening the tax base and improving compliance. While 21 states agreed to the implementation, we believe that given the long term benefits of the regime, other states and union territories should follow suit in time.  

Which sectors do you think will do well in medium term?    

India has been traditionally a stock pickers market, but the strong macro story in 2003 led to a prevalence of a top-down approach. Long-term investors are better off adopting a bottom-up approach and invest in companies with good fundamentals across sectors. We believe that there are opportunities across sectors and picking up the right stocks will be more important rather than identifying sectors. 

With so many equity fund IPOs hitting the market, has the mindset of Indians about MF changed? 

We believe that the response to equity fund IPOs reflects the growing realization amongst Indian investors about the advantages of professional fund management and recognition of the long term potential of equities given the strong fundamentals on the economic and corporate fronts. 

Which MF should a small investor who is willing to take risk invest in for a short term perspective?

We believe that investment strategy and the asset allocation of an investor should not vary from year to year. Investors should draw out an asset allocation plan based on their risk profile, time horizon and financial goals, and not on expectations of market behaviour over a one year period. Research has shown that the probability of attaining financial goals is much higher by following this approach, rather than by trying to juggle around with investments, and time market cycles. 

As a small investor does a mutual fund help me in a falling market compared to directly investing? 

This would depend on the individual, but given the growing complexities of capital markets, constructing a portfolio of good stocks and maintaining the same is cumbersome. If one has the time and expertise to do the same, they could do it, but we believe that managing money is a full time job, and is better left to the professionals. Mutual funds with established performance track record over market cycles offer a simple and convenient way for small investors to participate in the equity markets.