The Hindu Business Line : `Derivative products are set to gain significance'

"A multitude of equity products were introduced last year. It was a virtual parade... yet investors displayed a definite appetite for equities. Given the trends witnessed recently, the asset management industry may not experience anything different in the coming months," he told Business Line, adding that the retail side of the business is progressively becoming weightier. Excerpts:

Why do you say investors will continue to root for equity funds?

Agreed, the stock market has moved up substantially. The main indices have clearly reflected this rising trend. However, despite the escalation, investors have been willing to place large bets on equities. The willingness becomes evident when one looks at the trading volumes recorded in recent times.

As for funds, inflows have been quite good from time to time. This situation may not reverse in a hurry.

In fact, this year too, equities will continue to be in favour. Investors will focus on equity funds in an effort to optimise their return. As always, they will want fund managers to pick the right stocks and perform in a manner that will whet their appetite.

Aren't people tired of products carrying tags like `mid cap'?

Well, investors have seen quite a few schemes carrying such names. Others are probably in the pipeline. These do offer diversification within their chosen market cap boundaries. It has to be seen how these funds perform in future. Good performance will be rewarded by the market.

Let me tell you in this context that there will soon be more varied options to choose from. Take, for instance, commodity products. Historically, Indian investors have been keen on trading in commodities and there is no reason why funds based on commodities will not take off in this country.

Derivative products are also set to gain significance in our market.

Retail inflows may still disappoint the industry. Your comments.

You can't deny that retail investors are coming into mutual funds in larger numbers. This is particularly evident from the sizeable amounts mobilised by the recent IPOs. I need not mention names, but in many cases these collections have been driven by large-scale retail interest. Retail is now a very potent force.

On the other side, not much is happening on the debt front and many categories of debt funds have lost their earlier attractiveness. Liquid and floating rate funds are about the only things that seem to display some signs of life. Retail money may not move towards debt funds again unless the realities change significantly.

All said and done, investors will expect a lot from us. They will continue to look at the performance tables with a magnifying glass. In the long run, the market will accept the performers and reject the stragglers.

New players will not make any major difference. Do you agree?

Funds have to come up as vehicles that allow people to save and allocate their resources in the most effective manner. The new entrants as well as the existing players will have a role to play in this regard. Good saving and investment habits will have to be encouraged further.

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