The Hindu Business Line : `Enormous amounts are still locked in bank deposits'

LIFE is tough for distributors of mutual funds when it comes to guiding investors towards equity schemes on a sustained basis, says Mr Sandeep Parwal, MD, SPA Capital.

Excerpts:

Are investors really taking to equity products now that fixed income is less attractive?

There is undoubtedly a trend towards allocating more to equity. But investors are yet to do so in a big way. Even if they are considering more equity, the focus is on short-term exposures. Those who are active in the market are still taking quick decisions regarding entry and exit.

In the past, people had the habit of reviewing their portfolios far too often. This habit has generally not changed.

As an intermediary, do you think debt investments still have a future?

It is not that investors are getting entirely out of debt. The market knows that the huge returns generated by debt investments in the old days will not happen again soon. Those fourteen per cent returns are part of history.

However, a section of the market - I am talking about investors with good money to spare - is still looking at parking spaces, complete with tax efficiency. But the smart arbitrage money seems to be moving away. A simplistic four or five per cent return will not make such money come back.

How long do you think this scenario will continue?

Well, this will change when genuine surpluses start coming back into the system. Such a change may well be driven by high net worth customers. As things stand, a lot of money is still being kept in debt funds, including liquid funds. Investors are obviously waiting for opportunities to deploy these holdings in a meaningful way. Till such opportunities arise, MFs will continue to be chosen for the convenience they offer, especially the liquidity that they provide.

Are MFs really trying to retain longer term money?

There are individual efforts, of course, but enormous amounts are still locked in bank deposits. Funds have tried out innovative ideas... I can immediately think of floating-rate products.

On the other hand, certain sections are worried that some fund managers have decided to park assets in FDs. It's true that FDs have formed a key part of some portfolios in recent times. But this needs to be seen as a temporary phenomenon which is likely to change once the fund managers concerned find the right avenues to invest.

If a fund manager is actually trying to protect one's interests in an ultra-conservative manner, then one should thank him. But the same fund manager must be hauled up if he keeps doing it for too long.

Isn't such a static approach harming the cause of MFs?

Yes, but the point is that funds are gaining in stature for altogether different reasons. Clearly, more investors are accepting them today.

High net worth individuals, for instance, are becoming more used to the idea of investing through funds. This trend, as I see it, will only grow stronger in future. To give you an example, let me tell you that tools like systematic investment plans and systematic withdrawal plans have already found greater recognition.

Things will improve when people will be prepared to take bigger bets on their fund managers, based on the performance that the latter have delivered.

More Stories on : Interview | Mutual Funds

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
ULIPs popularity on the rise

Tell the losers not to be dyed-in-the-wool!

Indian counters shine

`Enormous amounts are still locked in bank deposits'

Undertone bullish on Dalal Street

IOB scheme for PSU issues