U. K. Sinha

MUMBAI: The infrastructure sector, retail and automobile and auto components are likely to remain "very good sectors" for purposes of investment, says U. K. Sinha, Chairman and Managing Director of UTI Asset Management Company.

Companies with strong fundamentals in the pharmaceuticals and biotech sectors too would be good from the point of view of long-term and medium-term investment, he feels.

In an interview to The Hindu, Mr. Sinha said that despite the oil price rise, increase in the prices of base metals and high interest rates, institutional investment is continuing to flow into India. "Go to any part of the world, whether it is Japan, South East Asia, the Middle East, Europe or America, investors are bullish on India. So, on a comparative basis, India is attracting more investment than other countries", he said.

Asked whether the continuous rally in stocks was a positive development and sustainable, Mr. Sinha said it was true that expectations of investors were very high.

The mutual fund industry would have to communicate to and educate investors that such high level of growth was not possible all the time. "But the equity market will continue to give much better return than fixed income instruments. Between 1979 and 2005, the Sensex has given a compounded annual growth rate of more than 15 per cent. There are no reasons why this trend will not be maintained in the coming years", Mr. Sinha observed.

Regarding the UTI AMC's proposed gold-backed fund, Mr. Sinha said the unit of transaction would be one gram of gold of 24-carat purity and hallmarked. It would be stored with some custodian, which would be a bank. At the time of redemption, the investor could sell it to a market maker or sell it in the secondary market to any other investor or get his or her gold back in the physical form. According to Mr. Sinha, the advantage of the scheme included the scope for investors to start investing in small lots.

Gold as a commodity had shown a growth of about 100 per cent in the last five years or 150 per cent in the last ten years.

Thus gold has been a less volatile investment than the market and provided an avenue for risk diversification for large investors, he added.

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