The Hindu Business Line : `Investors will get used to this level of volatility'

Kotak Mahindra Mutual Fund intends to bank on two big factors - the first relating to investor behaviour and the second stemming from its own plans. One, investors will be able to stomach, at least partially, the volatility that is so evident in the stock market these days. Two, it will consider the introduction of a few new funds, including ones that are close end and structured, to meet the market's expectation.

Mr Sandesh Kirkire, CEO, tries to explain the latest trends.

Excerpts:

At 12,000 points and more, sentiments are extremely jittery. How do you perceive the situation?

Yes, whether you like it or not, the long term average daily market volatility continues to be in the one per cent range. In that sense volatility has not risen.

However, if you consider it on the basis of number of points, it seems to be higher. Investors, one hopes, will get used to this level of volatility.

We must also appreciate the fact that with the rise in market levels in recent times, any small negative, like what we saw the other day when SEBI banned a few depository participants, increases the volatility significantly.

Given the uncertainty in the equity market, is there a strong argument in favour of moving out?

The issue you are essentially raising is, should investors hang on for some more time... and here we are not really referring to those who are genuinely long term investors.

I will deal with this by just saying that I do not think that such a call can be taken at this juncture.

Remember, it is not a case of simply a few sectors running up. It is truly a broad market movement. Liquidity is on the rise, both local and global. It is clearly a case of corporate re-rating.

How will your latest offer be effective?

This happens to be a structured offering for investing in a combination of debt and index options. The idea is to manage equity risk through index options. Twin Advantage, as we have chosen to call it, is a three-year, close end scheme.

It will allocate to debt in a way so as to return your initial investment. The attempt here is to create a healthy upward participation in the equity market.

How do you look at the recent NFO expense regulation introduced by SEBI?

The mutual fund arena in India, which has already gone through a series of far-reaching changes, should mature with the creation of this regulation. Hopefully this should also lead to what we think will be an important fallout - better investor education.

There will be a change in the sense that we will probably see fewer a NFOs in the future. The new offerings may well be more in the nature of close end schemes.

How will Kotak MF react to the new norm?

In the days to come we hope to think about the introduction of a few close end funds together with some structured products. We intend to add to our asset base, which stood at Rs 11,800 crore at the end of April.

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