The Hindu Business Line : A lot of positive factors going for India

PRUDENTIAL ICICI MF, which has lately come to occupy the second position among asset management companies, hopes to sustain its lead in the days ahead. Fund houses, says Mr Pankaj Razdan, its MD, should not simply aim at becoming bigger in size.

"They need to provide investors with two critical things: A basket of good products and the ability to service them," he notes. Here, he dwells on a few interesting issues.

Excerpts:

Some MFs seen to have become well-oiled marketing organisations...

That's just a perception. The point is funds come out with new products based on the premise that there is a need. And no one wishes to devise a scheme that ultimately will not sell. You will agree that there is a lot of good performance all around.

Equity funds have generally done well. I can speak for my company and state for sure that we have surely tried to work out innovative schemes, ones that actually meet investors' objectives.

In fact, in some cases, we have set new precedents.

How long do you think will the general euphoria about equity last?

Equity investors in India have seen the two best years... a lot of hope was built around equity and the stock market has not failed people. Having said that let me refer to a very important factor - corporate profitability. We have had a great performance on that front. Look at the kind of profits local companies have had in recent times. They surprised even the biggest naysayer among analysts.

Also remember, there are a lot of other positive factors going for India too. We remain an important destination for foreign money.

Why don't index funds sell in this country?

You have a situation that is clearly dominated by actively-managed funds. Index funds are the opposite, in the sense that they are all about passive management. They merely try to imitate the chosen indices.

In a market characterised by seriously bullish sentiments, one cannot truly expect these products to be popular. It is not that the MF industry has not brought out enough products in this category.

Elsewhere, index funds are considered favourably by certain categories of institutional investors, pension funds included.

We will have to wait and see how the story pans out in India.

SEBI recently hinted it may regulate distributors too. How do you react to this?

All I can say is that at the moment distributors in India are not regulated per se. They serve as agents of asset management companies. The latter are their principals. Whether there is enough scope for regulating them is an issue that should be left to SEBI to address. As things stand, distributors build bridges between product manufacturers - the fund houses in this case - and users of the products - the investors. Beyond this, I cannot tell you much.

Can we really expect PSU banks to play a bigger role in MF distribution?

There is no denying that these banks have a certain reach. They are present in areas, including far-flung ones, where few intermediaries will care to set up offices.

Bankers, public-sector or otherwise, are aware that they will be able to increase their non fund-based income if they can sell investment products. Besides, they know there is appetite for such products among their customers.

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