The Hindu Business Line : `Time is ripe for rise in equity investments'

As the market for mutual funds grows, investors will reach out to brokers in the neighbourhood and purchase or sell units online, just as they transact in stocks, presages Mr Ajoy Agarwal, Managing Director, Eastern Financiers Ltd. Excerpts:

Equities are a small fraction of household assets. What can change this situation for the better?

The time is ripe for a rise in equity-related investments — either directly via the stock market or through the equity mutual fund route. With interest rates not expected to rise substantially, the biggest issue facing investors is that of higher return on investments over the medium to long term. The days of high returns on fixed income products such as bank deposits are history. Investors must feel the need for allocating at least a portion of their kitty in equity-related assets. Mind you, this is where MFs will score compared to direct equities. Most investors do not have access to industry information and market outlook. This makes them susceptible to tips, which can misfire.

What in future can make a difference to the manner in which investors are serviced?

Service standards will separate the men from the boys in this industry. With distribution getting more technical by the day, investors will demand a better fare not only by way of delivery but also in terms of timely solutions. We see the Net playing a bigger role. Increasingly, transactions will be executed online or over the phone, while response times will have to be cut down to decrease the costs of distribution. Dependence on human resources for effecting transactions will reduce in the years to come.

Which product segments are likely to attract more investors in the days to come?

The trend across the globe is in favour of mutual funds over traditional investment products such as deposits and bonds. This is expected to be seen in India too, with the introduction of newer ideas like capital-protection funds, gold funds, real estate funds and the like. In fact, most of the new-generation products are hybrid in nature — a mix of debt and equity. This will actually help the case for equity-related investments. Education will play an enormous role. We think the investor base for MFs will increase rapidly. The proof of the pudding is in the eating: people will gain confidence when equity investments create wealth for them over a period of time.

Also, more specifically, they need to realise the power of concepts like rupee cost averaging. This will increase their confidence in MFs.

Intermediaries are currently spreading their set-ups. What sort of opportunities do you expect to tap?

While most intermediaries are increasing their penetration in equity broking by expanding into smaller towns, very few actually have plans to play the role of a `multiple-product investment advisor'. This role is very essential for the long-term benefit of small investors, especially those located in far-flung areas. Handholding of clients, immaculate planning and effective execution are important issues to reckon with. We plan to concentrate on expanding our branch network and taking personalised solutions even to the interiors.

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