The Sensex has risen by over 70 per cent in the last three months. But mutual funds seem to have missed the rally as most were sitting on cash.

We were fully invested at the 8,200 level and also at the 12,000 level. However, we underperformed by almost 15 per cent. That's because we bought puts. On May 18, when the election results surprised everybody, the markets went up by 20 per cent. And the put right gave us 4-5 per cent return. In the end you have to judge whether we took a rational decision on that day. How many people had predicted a decisive government? Many times, although you are rational and logical, you can still go wrong in the short term. But I have yet to see a rational fund manager underperforming the market over a longer period. We want people to give us their money for our skills rather than for our luck.

Where do you see the markets headed from here?

There are both speed breakers and game changers ahead. The positive side game changer is the growth opportunity available to India. The world is de-growing: Japan will de-grow by -5 to -10 per cent, and US and Europe in the range of 0 to -5 per cent. If when the world is in reverse gear India is accelerating at 7-8 per cent, that is a big positive.

The major world economies are sitting on zero per cent interest rates. They will look for opportunities where they can make returns. The world is convinced that India and China will be the growth drivers going forward. We have better growth opportunity by virtue of our demography, infrastructure requirement, and economic size. Capital can continue coming into our economy if we can provide better investment opportunities and returns.

... contd.