The Hindu Business Line : A bountiful FY03-04 for mutual funds

WHAT a year that was", says Mr Ashim Syal, Chief Investment officer, ING Vysya Mutual fund, aptly capturing the mood of the industry, looking back at financial year (FY) 2003-04.

The year not only witnessed an over 83 per cent jump in the assets under management but a flurry of product launches, new regulations and a very buoyant equity market.

"The year marked a smooth transition from debt to equity products. Though the last week of March was a squeeze, the markets were still not as volatile as they were in February and March last year," said Mr Ved Prakash Chaturvedi, Chief Executive Officer, Tata Mutual Fund.

"Investor awareness has been key this year. We have finally moved away from making investment decisions based on the previous day's net asset value," said Mr Pankaj Razdan, Prudential ICICI Asset Management, the company nipping at UTI's heels in terms of AUMs.

While `globally competitive Indian companies' was the theme of the year in terms of sector-specific product launches, monthly income plans (MIP) were definitely the industry favourites. Most fund houses launched new MIPs, while others spruced up the equity components on existing MIPs and launched variants.

The year has also been one of many regulatory firsts. "The cut - off time regulation came out fairly quickly and now it's a guideline. We are seriously debating the virtues of the Association of Mutual Funds in India becoming a self regulated organisation, there has been awareness and effort in eliminating bad practices," said Mr Krishnamurthy Vijayan, Chief Executive Officer, JM Mutual Fund.

On the negative side, all fund houses agree that the volatility in the debt market, especially since September 2003 has been a big disappointment.

The industry is divided over the opinion on the distribution set up. While Mr Chaturvedi feels that distribution came of age this year, Mr Vijayan warns that the distributors are enjoying dominance at the cost of investors.

Looking forward to FY04-05, the mood is one of consolidation. Fund houses have more or less completed their product portfolio and now seek to actively grow them. Wooing the retail investor is high on everybody's agenda, though there is a concession that the "race for size would continue."

The market is poised to deepen and expand. "The sign that retail investors are positively attuned to mutual funds is stronger than ever before," said Mr Razdan.

International bigwigs Fidelity and ABN Amro are poised to enter the industry during this fiscal. This is expected to bring in global standards, best practices and innovation to the industry.

"The key to the new year would be mainly in product innovation. First, we have to learn to digest the 6000 levels in the BSE Sensex as something the market can handle and grow from. Even on the debt side, where 50 per cent of the industry money lies, the effort should be in launching products that will ride the volatility," said Mr. Syal.

"Next year will be better. Markets would be slightly less turbulent, real estate, commodities and other products would be ushered in and all parts of the industry would get regulated to protect the investor," crystal gazed Mr. Vijayan.

If FY-03 was the year of initiating the retail investor, FY-04 seems poised to offer a great ride.

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