Prashant Jain is head-equities at HDFC Mutual Fund, one of the largest mutual funds in the country. The equity funds under management at HDFC MF are approximately Rs 1,500 crore (Rs 15 billion).

Jain joined HDFC Mutual Fund consequent to the acquisition of Zurich India Mutual Fund by the former. He was earlier the chief investment officer at Zurich India Mutual Fund. He has 12 years of investment management experience. He had a long stint of 10 years with Zurich India Mutual Fund and was with that company since its inception in 1993.

Prior to this, he worked with SBI Mutual Fund for 2 years in the areas of equity research and fund management. He has a Masters degree in Business Management from IIM, Bangalore. Before this, he obtained a Bachelors degree in Mechanical Engineering from IIT, Kanpur. He has also done his CFA charter from AIMR, USA in 2000.

Equity markets are currently witnessing one of the most volatile phases in the recent past. This has fuelled uncertainty within the investing community. Jain discusses what investors should be doing at this point of time with PersonalFN.

The Indian stock markets have run up dramatically in the last six months. The rise has probably been the sharpest in decades. How do you see the markets now in terms of valuations and investment opportunities? What is your view going forward?

It is in my opinion very difficult to predict the short term movements of the market. From a longer term prospective, while the markets are not as attractive as they were six months back, it would be correct to say that there is reasonable upside for the medium to long term investor. The reason for this is the expectation of continued growth in the economy, exports and in corporate profits.

Further, the PE multiples are low compare to the long term average PE multiples of India, compared to the growth rates in corporate profits, in relation to bond yields and also verses PE multiples in many other markets across the world.

Can you share with us your views on the economy and how you see it performing over the next couple of years?

I think economic growth will be robust in the medium term. This should be driven by steadily rising consumption in India and continued growth in exports. Consumption growth should be supported by steadily rising income levels, stable asset prices, availability of easy and cheap consumer loans, rising aspirations and lower incentive to save because of lower interest rates and low penetration levels of consumer goods will all drive consumer demand.

Export competitiveness is also improving across a number of sectors. Apart from IT and pharma sectors, good export growth also take place in auto & spare parts, engineering goods, chemicals, textiles etc. Lastly, the investment cycle is yet to come back in India and that should happen over next 1-2 years as surplus manufacturing capacity is slowly absorbed.

How would you define your investment strategy with respect to the funds you are managing?

The investment philosophy/strategy can briefly summarised as follows:

* Invest in line with the risk profile of products.

* Invest in assets that we understand, are of reasonable quality and are reasonably valued.

* Lastly, maintain adequately diversification.

What in your view is the rationale for investing in equity funds from the retail investor's perspective?

Equity funds are a convenient vehicle for retail investors for investing in equities. They offer the following advantages:

* Ease of transactions.
* Tax efficiency.
* Diversification.
* Management by experienced people.

What is your view on sectoral funds? Should they find place in a portfolio at all?

Sectoral funds add less value compare to diversified funds to investors. They are suitable for well informed investors, who have specific views on the individual sectors.

What is your advise to the retail investor?

Asset allocation is the key for a successful investment program. Unfortunately, most of the time and efforts is devoted to either market timing or security selection. In my opinion, in the present market conditions, investor should invest that portion of their wealth in equities which they do not need for 2-5 years and on which they can tolerate a reasonable depreciation (which is likely to be temporary). This is so because irrespective of earnings growth or PE multiples, equities can witness corrections any time. Finally, it is advisable to phase out equity investments over a period of time.

Where do you invest your own money?

A predominant part of my money is invested in equity and balanced funds.

What kind of books do you like to read?

I like to read books on investments, fiction and religion.