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Monday, Nov 15, 2004

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Markets - Interview

`Sentiment not likely to improve dramatically for debt funds'

Nilanjan Dey

Kolkata , Nov. 14

IF you don't have a medium-to long-term view, think twice before putting your money in equity funds, maintains Mr T.P. Raman, MD of Sundaram MF. He obviously wants investors to be cautious, now that the stock market has run up quite a bit and chances are that the road ahead will see some consolidation.

Fund houses, he told Business Line, will have to live with the fact that their debt offerings may not see big inflows for some more time. "While debt assets have played a dominant role, this should be good news for equity funds", he adds.


Where do you see debt funds going?

I know that the market has been waiting for positive signals on the debt front, but that may not happen in a hurry. Things are not likely to improve dramatically over the near term.

Sentiments have stayed weak for months now and many investors have allowed bearish sentiments to rule their psyche. In fact, sections of the market are getting increasingly used to the feeling that debt may well remain this way.

But that is not stopping them from choosing the short-term products, including liquid funds, offered by MFs. I am referring to the likes of Sundaram Money Fund.

Will equity funds be a good antidote for their debt counterparts for long?

So far there are no major complaints about the way equity funds have been performing lately. Investors are fast realising that they do need some exposure to equity. This includes people who had in the past habitually chosen debt as their preferred class of assets, given the kind of safety that was associated with it. But for many of them, the faith in debt has been shaken.

In this respect, Sundaram MF is not an isolated case as we too have seen this happen to our investors. It is not that the market is unaware of the risks involved with equity... but if the current scenario lasts, it will not shy away from equity funds altogether.

You have been talking about another equity scheme...

Yes, this will be a fund that will invest in companies with a global presence or in companies that generate a significant part of their revenues from overseas markets. And thanks to recent trends, there will be no dearth of opportunities for such a vehicle.

It will be our fifth equity fund, one that is likely to have a diversified portfolio representing a number of sectors. We already have a growth and a tax-savings scheme as well as a mid-cap fund and one dedicated to companies operating with leadership status in areas of their choice.

The proposed Sundaram Star Fund may materialise this December but a final decision from our sales team on the matter is being awaited.

We hope to take it down to the retail segment, for which a different marketing approach may be required. In fact, we expect a surge of retail accounts based on ordinary investors' resolve to increase their allocation to equities.

Let me also mention that we will soon come out with a floating rate debt product. However, we may not immediately go ahead with our earlier proposal on an index fund.

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`Sentiment not likely to improve dramatically for debt funds'

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