WF: Markets have corrected sharply in recent days. There are concerns whether this is the beginning of a larger downturn. How do you see the present correction?

Bala: The present correction is largely because there is a lot of noise coming in from the global market wherein some people are concerned about big global banks' books getting restricted in terms of equity market activities. But at the same time the market also has run up a quite a lot. So, markets have perhaps got a reason to take some profits.

We think this correction is of a temporary nature and our outlook over the next 2 years is clearly positive, especially on the back of robust economic growth in India. Growth in India will accelerate as the infrastructure activities gain momentum.

We also believe this correction is handy from the point of view of attracting flows - both global and local.

WF: Earnings from some infrastructure companies like L&T and BHEL were disappointing. Is that a worry - given that infrastructure is the base on which our growth projections are being made?

Bala: While it is true that this quarter's numbers disappointed, one quarter's numbers are not a good indicator for outlook. We believe infrastructure spending on power, roads etc will be strong over the next 2-3 years - which essentially means that there is going to be a huge opportunity for BHEL and L&T.

WF: Do you believe that the credit policy statement due shortly has been factored in by the market or are there possibilities of any surprises here?

Bala: I think the credit policy is largely discounted in the market. We believe RBI might increase CRR by 50 bps - that is quite likely already discounted by the market.

WF: There are a lot of concerns being expressed about China - its efforts to cool down lending and asset prices seem to be making markets nervous. How serious is this issue and what can be implications on our market?

Bala: China is looking at controlling lending activities as well as controlling prices. Plus there is a concern on Chinese real estate prices growing to a new high. So all put together there are some concerns but that I think is more to do with the profit on the table. Across the globe, the market has run up a lot. Nervousness at higher levels is natural and profit-taking is only to be expected. I don't see much more into this right now, other than a correction after a steep run up.

WF: Out of all the news flow that is coming in from US, China, Greece etc, is there anything that you think may cause concern from a longer term perspective or do you see these as merely contributors towards a healthy correction ?

Bala: These are all contributors for a healthy correction in my view. The outlook both from an economic recovery point of view as well as an earnings point of view for India and Indian markets is going to remain very strong.

WF: How deep could this correction could go to ? What is your market outlook for 2010?

Bala: I would expect the market to be range bound this year. The Sensex should probably trade within a range of 15,000 on the down side and 19,000 on the up side. Action will be more stock specific - that's where we are putting a lot of emphasis this year.

WF: On the fixed income side, what is your prognosis on where are interest rates headed in the next 3 to 6 months ?

Bala: On the fixed income side, the 10 year gilt is trading in a narrow band. We don't think the 8% level will be breached - though there is a school of thought in the market that the long end will come under pressure.

On the short end, currently we have a steep curve. Maybe we could expect the short term to move up gradually. Once the liquidity get subdued and credit starts picking up, maybe the short term interest rates in our view will go up.

WF: Which products would you advise distributors to focus on the fixed income side ?

Bala: For funds available for more than one year, income funds are worth considering - as well as MIPs.

WF: Moving on to a different aspect, Birla Sun life AMC has recently celebrated 15 years of wealth creation. You have personally been involved in most of these years perhaps longer than anybody else in the system and have played a key role in this stupendous success. What are the key things that you believe have contributed in this fantastic success of your AMC?

Bala: One of course is the commitment of people - the organization. Second is the investment performance - which I think is largely due to our robust processes. We may say anything - but at the end of the day, we need to walk the talk. The third aspect is the commitment from both our shareholders as well as the senior management team - both as the financial services group as well as the AMC. The commitment I refer to is in terms of growing the business, growing the customer base and giving a great service. And last - but not the least, is the trust that the Birla group enjoys among millions of Indians. This helps us attract customers as well as quality people to work for us.

WF: What are your plans for 2010 for your company, what are the key initiatives that you will be focusing on ?

Bala: There is a huge opportunity for the mutual fund industry to grow, given the strong performance track record of the past several years. There is a big need to educate investors about basic investment principles, investment discipline. Education will help increase market penetration. This is going to be a big focus area for us this year. We want to get investors to buy into the SIP idea in a big way. Even HNIs should be educated about the benefits of STPs - I think this is the best way forward.

WF: What are your key messages for your distribution partners?

Bala: Distributors in my view should focus on financial discipline. They must strive to inculcate into the mind of investors a focus on long term investing rather than short term investing. As mentioned, spreading the SIP and STP messages will benefit all of us - investors, distributors and AMCs.

WF: How do you see the emergence of the BSE/NSE platforms for the mutual fund business ?

Bala: I think if everything goes right there could be a good revolution in the MF business with the kind of reach that these platforms will be able to provide. All depends on execution - there are some steps that will hopefully be taken before end of March to provide the scalability. I am quite optimistic about this development.