The Hindu Business Line : `Work out systematic investment plans'

"The industry now has to live up to the challenge of increasing retail penetration through investor education, product innovation and increasing reach across geographies and customer segments", he tells Business Line.

Excerpts:

Isn't this the time to exercise restraint before taking fresh exposure to equity?

Well, a market top is known only when it is over. For an individual, taking positions in equity is better driven by needs and the desired asset allocation rather than a call on the market level.

Going by past experience, it pays for an equity investor to be patient. Let's not forget that today we have a rising market that is supported by a robust economy with strong fundamentals and favourable demographics. However, we would advise investors to exercise caution, given that the market has already run up in the recent past.

Let them work out systematic investment plans that will help them allocate a fixed sum every month, thereby taking fresh exposure in a gradual manner. This is a method adopted world-wide with a view to beat market volatility.

How can MFs react to the Budget so as to emerge as bigger vehicles for savings?

The Budget will help increase the scope of mutual funds, both by way of product development and market expansion. It seeks to open up a huge retail opportunity for funds.

The abolition of Section 88 and Section 80L benefits makes investment in traditional tax saving products like post-office MIPs and NSCs somewhat less attractive, leading investors towards MFs. The removal of caps on various tax savings instruments will enable them to look at funds seriously. As for products, the move to allow MFs to offer gold exchange traded funds spells good news for the industry.

Gold is one of the most preferred forms of investment in India. Gold ETFs will enable investors to realise the benefits of investing in the noble metal with added advantages - investment in small denominations, increased liquidity, increased safety and without wastages.

What are Pru ICICI's plans with regard to new products?

We already have good width in our portfolio. This will be enhanced further. Ways to make the existing products more scalable are being evaluated.

Our focus is on creating solutions rather than products that investors may not readily relate to. In the near term, we are considering ways in which gold ETF can be offered. Also, international funds are being considered - these will entail country risk diversification. However, the $25,000 limit is a restrictive factor here.

I must add that with most fund houses having completed their bouquet of core products, the industry has now moved towards the introduction of thematic funds. We too are assessing certain strong themes. But, mind you, not all thematic funds offer a high level of scalability.

The debt side of the business has fallen silent...

MFs have developed their portfolio of debt products based on the varying gap in duration of the available debt instruments. The market's appetite has been largely restricted to investment-grade papers, which offer lower returns.

So far, we haven't seen debt funds that are on the lower end of the investment grade and the higher end of the speculation grade that offer higher returns. This category of high-yield bond funds holds great promise in India. Yet it hasn't been tapped on account of low liquidity in the market. But going by recent international experience, we foresee a growing interest in this product category in the times ahead.

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

Stories in this Section
MFs' IPOs flourishing with funds

Doubts loom over MAPIN implementation

Special margin on 30 scrips

Marginal decline

Further downslide likely

`Work out systematic investment plans'