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Have raised cash holding: Birla Sun Life MF

June 16, 2006 13:24 IST

The CEO of Birla Sun Life Mutual Fund, SV Prasad believes the redemptions story is completely overdone. He did agree that there were redemptions, but that was along with net inflows into the MFs' equity funds in May, even though there were no new fund offerings.

Discussing the MF house's valuation call, Prasad says, "I have always maintained that either buy a stock or sell a stock based on its valuation. We are clearly a bottom up, long-term and a long only fund. So there is no question of taking any topped down or technical call."

Excerpts from CNBC-TV18's exclusive interview with SV Prasad:

It has been a rough ride for the last few days, but what have been your observations from a mutual fund perspective? Is it littered with redemptions or are those stories being overdone?

I think those stories are being completely overdone; otherwise I would not be standing here and talking. Hopefully, one should see better sentiments prevailing in the next few days.

What has been the experience that you have seen in the past few weeks? Have you not seen any redemption pressures? Have inflows quietened down?

If I were to say that there were no redemptions at all, obviously that would be false. As a pleasant surprise in May, we saw net inflows into our equity funds, even though we did not have any new fund offerings.

Even in the current month, though we have seen net outflows, the numbers are very small, nothing to press the panic button.

We have generally seen that whenever markets have taken a beating like yesterday, we have some small flows. I think people are also getting a lot savvier than what we presume them to be.

How are your fund managers approaching this correction? Are they sitting on a large amount of cash or have they been buying these sharp falls?

I am not a great believer in taking major cash calls because that is very

difficult for anybody to predict. Having said that, certainly we have increased our cash levels because so far investors believed in the long-term Indian story, but it is always better to be little bit prudent and prepared. So we have increased our cash levels gradually to around 10%.

Is that a valuation call? Do you think you will see better value in the market at this point, or is it just a tactical move to sit on a higher degree of cash?

It is something that is done gradually and not overnight and is more than a tactical call. It is more of a call that one can take from a prudent perspective.

I have always maintained that either buy a stock or sell a stock based on its valuation. We are clearly a bottom up, long-term and a long only fund. So there is no question of taking any topped down or technical call.

But one has to accept the realities in the market. There is the sentiment factor, which is not just an Indian scenario, but a global thing that we have seen over the last few weeks. So in that kind of scenario, it is better to be prepared rather than being over smart.

You have midcap funds too in your basket. What has been the experience there because the carnage there has been really very harsh? Have you seen any panic from investors on those midcap products?

Not really. I guess in some sense, the fact that we have launched our midcap fund way before the idea really caught going. Perhaps our size is relatively smaller than the others.

But I think more than the size, it is a function of how much retail are your equity funds? By and large, most of our equity funds are largely retail. So in that sense, one has always seen that retail investors are willing to wait that much longer as opposed to an institutional investor. That has been our typical experience.

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