The Hindu Business Line : `MF industry responding well to the market's needs'

The funds industry has never had it better: Assets under management is on the rise, the number of players looks set to jump, products are being rolled out by the dozen. Yet, as Mr A.P. Kurian, Chairman of Association of Mutual Funds in India, mentions, the industry's total size is still a mere fraction of the nation's GDP. "Where are funds headed for?", he asks and tries to find answers.

Excerpts:

A few more funds are on their way to do business in India. How do you see this?

At least a couple of them are expected to get going soon, now that they have secured the regulator's approval. I am referring to JP Morgan and AIG.

It is also true that several other players intend to start operations here.

The Indian market obviously looks good to these companies, some of which are indeed big names internationally. In the backdrop are a host of small issues that the industry is now growing accustomed to.

At least one such issue stems from the fact that retail investors are taking to funds in a bigger way.

At another level, the industry is responding well to the market's needs. Look at fixed maturity plans, for instance. These have now become a bigger proposition. Many HNIs find these attractive. There are other examples.

Variation in terms of mainline products seems to be limited. Your comments.

Well, on the equity side, there has definitely been some diversity in recent times. And there can be no second opinion on this. On the debt side, however, things look very interesting at this juncture.

Just see how interest rates have changed and how they are expected to move. A fixed deposit offered by a bank, which may bear an interest rate of nine per cent, may now lure a customer away from a traditional debt fund.

It seems that we may also move into a double-digit rate scenario. It has to be seen how the industry faces such a situation.

On another front, what excites me is the emergence of SIPs. The fact that one can invest a very small amount on a monthly basis for the next three or four years with the hope of getting good returns is appealing enough.

I am told that a lot of ordinary people in the cities have started doing this these days.

Isn't the relatively slow growth in the industry's overall asset base a worrying factor?

Right. Ours is still a minuscule contribution to the country's GDP. But there has been growth all right, the pace of which may not be satisfactory to all and sundry. Some sections may wish to put us in the context of what has been happening in the economy as a whole.

India's growth, at 8 per cent or even more, throws up a challenge for funds too. Let us look at it this way: Growth for the industry will come when more Indians realize that they must turn into investors and not remain mere savers. It will lead to steady conversion.

We understand that commodity funds will not happen soon.

Yes, that seems to be the situation. Gold funds nevertheless will be tracked closely by all concerned.

Several players are expected to roll out gold funds in the days ahead. These will add to the variety that we talked about earlier.

Benchmark MF and UTI MF are expected to be among the first off the block.

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