The Hindu Business Line : World of changes in MF industry

Mr SANJAY Jha was one of the poster boys of the Indian asset management industry in the early days of its liberalisation, gifted enough to be considered as an unofficial spokesman who represented all that was good in the mutual funds circuit.

For those who can't recall those heady days, Mr Jha was the most visible face of Alliance Capital. And this is probably the best time to remember him. In doing so, we can underscore the difference between then and now, especially when Alliance Capital is itself on the verge of pulling out.

It would be interesting to see the current state of the industry through his eyes, years after he called it quits.

The industry has changed in the past 10 years or so, almost beyond recognition, thanks to the new players who have entered the scene, the innovative schemes, which have been launched, the new-fangled regulations that have been devised and the way investors' preferences have altered.

If Mr Jha had been around, he would have seen all this and more. He would have also known that some of the practices of yore have been honed to perfection, while others have been discarded altogether. The treatment meted out to distributors, for instance, has taken new dimensions. Intermediaries today are humoured like never before, a trend that is gathering strength with every passing day.

The last few years have indeed seen the domestic equity scenario change from bad to good. The outlook has turned positive, particularly because of measures taken by various governments, the improving economic profile of the country and healthier corporate fundamentals. There is good news emanating from sectors such as business process outsourcing, IT services, pharmaceuticals, auto ancillaries and engineering.

Many businesses are flourishing, capital investments are adding up and capacity expansions are being worked out.

On the other side, there are concerns still, many of them arising because of international crude prices, inflationary pressures and fiscal deficit. But the stock market has largely defied these negative factors to gain from the surging inflows (much of which have come from overseas investors). On the whole, equity funds have done well.

Returns provided by debt funds, however, have gone from bad to worse. Investors have been lately recording losses - the plight of banks' treasury departments is now known by all and sundry. Money has moved out of traditional and time-tested income funds to smarter destinations such as floating rate funds. Inflation is high and liquidity has been abundant, two issues that have a major impact on the fortunes of the market. There is now a small pick-up in credit, though, which is being mostly considered as a positive signal.

All said and done, the Indian fund management industry has been in the news for more reasons than one. Yes, there has been a spate of M&As, which has reduced the number of active players. But new ones like Fidelity are coming up, while the likes of Societe General are showing more than a passing interest. And the AUM (assets under management) figures speak for themselves. Yet, with Alliance Cap finally calling it a day, the industry will see the exit of one of the best-known names, one that had several firsts to its credit. Mr Jha would have been a very proud man.

FUNDSPEAK

The fact that Indian corporate houses are establishing themselves as globally competitive in areas other than just software also adds to overall economic growth - UTI Mutual Fund

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