The Hindu Business Line : `Market may well be choppy for some more time'

THE asset management industry in India needs more sticky money, especially now when investors are asking so many questions". That was Mr Ajay Bagga, CEO, Kotak Mahindra Mutual Fund.

Here, in an interview, he discusses a range of issues.

Excerpts:

There is a feeling that the MF industry is going nowhere as assets are not growing in the way they should. Your comments.

Well, the industry has recorded significant asset flows on many occasions. Obviously, inflows are not constant, dependent as these are on market conditions and the sentiments that investors display from time to time.

Equity funds, for instance, have been able to draw money from new investors in recent times. The growth in the stock market has helped their case. The point is clients have come to MFs whenever they have felt the need to do so.

It is only recently that many of them have moved out of traditional debt funds and have opted for floating-rate and liquid schemes.

Is the market for MFs becoming narrower?

No, what you may be referring to is just a sign of the times. So many fund houses are trying out new ideas, while distributors are being exhorted to support their initiatives.

Thanks to their attempts, the market has actually expanded. And I believe more is yet to happen on this front. The lack of alternatives has also enabled MFs to grow.

What we need now are more investors who are willing to stay committed for the medium to long term. MFs are trying to tap what is commonly called `sticky money' - money that does not go away easily.

Equity funds in particular are eyeing investors who can hold steady even in choppy markets. And, believe me, the market may well be choppy for some more time.

What can your investors expect by way of new products?

Quite a few proposals have been lined up, which have to be cleared by SEBI. I can't talk much about them at this stage, but can only share with you the very basic particulars. We plan to do an equity fund that will follow a contrarian strategy.

The only other so-called Contra Fund in India is managed by SBI MF.

Besides, Kotak MF for the first time hopes to dabble in passively-managed products, courtesy index funds that will track the Sensex and the Nifty. A tax-saving scheme has also been worked out, which will be yet another first for us.

These, along with the mid-cap fund that has just been launched, are expected to increase our equity assets.

We have no immediate plans to come up with new debt products. Incidentally, the MF is also on its way to expand geographically, reaching out to establish new points of presence.

Why do you suggest that mid-caps are for all seasons?

If you check out recent history, you will see enough examples of mid-cap stocks moving ahead in the market in terms of profile. In other words, mid-caps of yesterday are likely to become tomorrow's large-caps. Such growth has been evident in all sorts of businesses.

In many cases, the transition (to large-cap status) has happened very quickly, especially because investors have promptly appreciated the kind of profits recorded by the companies concerned. Many mid-cap stocks have actually surpassed the growth rate recorded by their large-cap counterparts, a phenomenon witnessed across sectors. That holds good even today.

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`Market may well be choppy for some more time'