We expect corporate earnings growth of about 10% for FY13: Pankaj Murarka

"Indian markets are trading at 12x 1-year forward earnings. Valuations of markets are at cyclical lows and they make a very attractive entry point into equities for the long term investor. Given the sluggish growth outlook, we expect the earnings growth in FY13 to be about 10%," says Pankaj Murarka Fund Manager- Equity at Axis Mutual Fund.

In an exclusive interview with Varsha Inamdar, Pankaj Murarka further said, "We are positive on healthcare, private sector banks and consumers. We think these sectors offer good growth opportunities and have a better resilience to adverse macro environment."

> Which are the sectors that you would bet strongly on? Where do you think value lies in FY13?We are positive on healthcare,private sector banks and consumers. We think these sectors offer good growth opportunities and have a better resilience to adverse macro environment.

> Could you explain the stock picking approach and risk management processes in place at the Axis Mutual Fund? Our investment decisions are research based. We do extensive macroeconomic and company research internally. This data is then verified against historical trends. The investment process utilizes both "Top down" and "Bottom up" approaches to identify fundamentally sound companies with sustainable earnings growth potential, credible management and acceptable liquidity.

Awareness and assessment of risk assumed is important to us. Risk management is embedded in the investment process itself, which ensures that all possible risks are addressed through appropriate risk management strategies.

> How do you see global economic and market outlook? Global markets are in a state of flux and are looking for direction from policy makers. The growth in Indian economy has softened significantly to 5.3% in 4qfy12 and 6.5% in FY12. Investments in the economy have moderated significantly and will have bearing on growth going forward. We expect the economy to grow at 6% in FY13. Indian markets are trading at 12x 1-year forward earnings. Valuations of markets are at cyclical lows and they make a very attractive entry point into equities for the long term investor. Given the sluggish growth outlook, we expect the earnings growth in FY13 to be about 10%.

> How do you perceive inflation and currency fluctuations as a challenge facing the Indian market? While core manufacturing inflation has fallen to 4.5-5% (which is nearer to RBI"s comfort zone) the rising prices of food has led to higher headline and retail inflation which has constrained the RBI from lowering interest rates. Recent increase to MSPs will also keep upward pressure on consumer inflation in the months to come. Another main issue affecting monetary decisions is higher fiscal deficits which are largely dependent on government policies. Both these factors could result in constrained investments, thereby affecting India"s long term growth potential.

Recent devaluation of the Rupee is a result of both structurally higher fiscal deficit and due to international factors such as Dollar appreciation. We believe that these external factors are transient but main issue of fiscal deficit i.e. government spending needs to be sorted out. Until then a constant currency depreciation could accelerate our current account deficit and have an inflationary impact on the economy.