WF: Markets seem to have given a thumbs up to the Budget. How do you read this Budget? What are likely to be the key drivers for the Indian market over the next 6-12 months?

Nagnath: clearly markets have done well on the Budget day and even today. It is a reflection of the fact that the macro picture looks good. We should see a GDP growth rate of 7% and here the trajectory looks to be achieving even close to 8% next year.

One important number that people do focus on is the fiscal deficit as a percentage of GDP. The fiscal deficit road map is one where it is going to be contained. 6.8% this year becoming 5.5% next year and then getting down to 4.8% and then to 4.1% . The intent is clearly there to consolidate and contain the deficits. And even otherwise, I think in the context of deficits around the world in many countries where it is actually rising against the backdrop of slow growth or stagnant growth, the road map presented in this Budget is a welcome sign.

The deficit percentage can come down on account of accelerating growth - which helps expand the denominator and therefore helps reduce the percentage, even if the numerator does not change.

So, fiscal deficit part is something which I will not worry about given that growth continues to remain to high. An effort to contain expenditure coupled with accelerating growth are both very positive from stock market point of view and from investors point of view.

As for as the growth is concerned, last year has been a fairly balanced growth across many sectors, principally led by consumption. We anticipate that trend to continue in the near future as well. Lot of emphasis will be laid on social development schemes - which put money into the hands of rural consumers. The income tax relief will increase disposable income and should enable the momentum of growth in consumption. All of that is a big plus.

We think that in addition to the consumption story, we anticipate that investment led expenditure would increase, as companies begin to hit capacity constraints and draw up capex plans. The Government has reiterated its thrust on accelerating infrastructure spending. So we have a combination of consumption which was raised with the help of the fiscal stimuli, which we will accept which will moderate a little bit but will continue to maintain a reasonably good pace, and on the other hand we will also have acceleration in infrastructure spending which will help boost investment led growth. And then you have agriculture which is coming off a low base effect due to last year's poor monsoons - which can also record a healthy growth. A combination of these things we think will help us reach 8% GDP growth. Corporate earning which were flattish this year, will accelerate to a 15 to 20 % growth for fiscal 2010-11. That should help keep the markets buoyant over the next 12 months.

WF: One issue that observes outside India seems to be cautioning us is that while the India story as you articulated seems to be getting stronger and seems to be stable, the situation in EU is not looking healthy and growth in US is tepid. Our markets could react sharply to negative developments in those countries - whether we have any connection to those events or not. To what extent do you think these concerns are valid?

Nagnath: It is a valid point that you are raising because economic recovery in the developed markets is till quiet tepid and we have the additional worries of sovereign credit issues in Europe. And therefore any of these issues could have the an impact of dramatically reducing risk appetite and increasing risk aversion in the equity market. That is a possibility at some point in the next 12 months or so.

WF: Is that something that you are worried about or is that the periphery of your consideration set.

Nagnath: No, it is something to keep an eye on. I am not saying that I am too worried about it neither I am too sanguine about it. It is something that one has to follow closely because these things can suddenly become centre stage. So that is something to keep an eye on and follow the headlines closely. Fact is as a result of any such possible events, if you have a sudden spike in risk aversion, equity markets around the world will take a knock - that would include emerging markets, that would include Asia, that will include India also.

But I believe that given our strong growth fundamentals, the impact of it will be less this time than what we saw during the global financial crisis. If we do have such a negative impact in India, we think that money flows will again accelerate back into high growth markets like India.

WF: You've won the Equity Fund House of the Year for the second year running - congratulations! What do you do differently, that enables you to stand apart in a highly competitive field, that enables you to win this coveted award consistently, year after year?

Nagnath: Yes, we are pleased to have won the CNBC-TV 18 CRISIL award for Equity Fund House of the Year Award for 2008 and 2009. Its particularly gratifying that we won it in 2008 which was a very tough year for the market and 2009 which was a great year but equally tough because the rally was so steep and sudden.

I cannot comment on our worthy competitors, each of whom have their own strengths - so I won't be able to tell you what's different. But what I would like to say is that the competition is very intense - when you see the number of fund that you analyse. All I can say is as far as our team is concerned :

a) We have a very strong team in terms of depth of experience.

b) More importantly, it's a stable team that has been together for a long time.

c) We compliment each others strengths very well. Team dynamics work very well for us. Some members in our team are strong in macro calls, some are strong     in bottom up calls and some have strengths in sectoral views.

These 3 factors have enabled us to perform consistently well in very challenging market circumstances.