The Hindu Business Line : `These are times of real test for investors'

Never before in the last three years were marketing teams of mutual funds so touchy about losing assets. The declining stock market is prompting their executives to work overtime to convince clients about staying invested. Mr Ravi Sharma, V-P, Sales & Marketing, Birla MF, says investors must now remain even more disciplined. "For them, this decline presents a real test," he tells Business Line. Excerpts from an interview.

As a fund marketer, how do you read the retreating situation?

No one had actually expected stock prices to be unidirectional for long. Nevertheless, a section of investors had indeed leveraged itself, and it is this segment of the market which now seems to be shifting allegiance. Clearly, such investors were under pressure to ease their positions. It is obvious this tendency has been triggered by the volatility we have witnessed in the last few weeks. It is also apparent that similar sentiments have been seen in other parts of the world as well. I am referring to certain emerging markets. To that extent, the latest Indian picture is part of a global phenomenon. Despite all this, the point to be noted is that not too many people are willing to get out in a huff.

But aren't MF clients quickly turning bearish?

There is migration of assets all right, reflecting the tension that clients are presumably experiencing. In a manner of speaking, the pyramid, which peaked when the market went up to 12,000 points and beyond, seems to be getting reversed. However, some sections do view this as an opportunity to average out their cost of holding. This is what our own assessment tells us. From what I understand, the problem with many people was that their asset allocation was not quite right. In fact, for a sizeable portion of the investor populace, risk-return expectations had become quite out of the ordinary. Now, if you are a disciplined investor, perfecting your asset allocation strategy is a task that you should always pay attention to.

Can you really expect investors to restrain their behaviour?

Well, so far the market was growing steadily and people tended to indulge seriously in comparisons... they compared one fund with another all the time. However, this is the time when such an exercise will be far more useful, because the men are separated from the boys only in a tough market. The time to conduct these tests is now. At another level, one expects distributors to play a critical role in retaining the market's faith in equities over longer periods. They will have to see what is best for their customers.

Shouldn't you rather ask equity investors to move temporarily to fixed income?

At the moment this will make no real sense, not if an investor has time on his side. Assuming there is only limited further downside, this may well be the occasion when averaging can become significant. Let me tell you here that in some of my recent interactions with investors, I have actually noticed a streak of confidence.

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