The Hindu Business Line : Lay investor is perhaps slightly confused at this juncture

I think all distribution outfits are trying their best to make some sense of the current situation. And such behaviour is in line with expectations.

Kolkata , June 11

Doomsday predictions are plaguing equity funds right now, admits Mr Rajan Krishnan, head of Principal MF. "Suddenly, there are long faces everywhere... hopefully, the decline in the market will bring about some maturity," he tells Business Line.

Excerpts:

Has the sharp drop in prices thrown you off-track?

So far the fall has not been very alarming, especially not when you see the last Friday's 500-points advance.

It came as a weekend relief to those who were spooked by the last few days' developments.

The buying that we saw leads me to believe that people's interest in the market has not disappeared altogether.

There will, hopefully, be more maturity in the days ahead.

When the going was good, no one had argued that the indices will continue to move up and up in a single direction.

In fact, we did ask people not to put all their money in just one asset class. But optimism was running high then and censoring that mood did not really work.

What I also want to say here is that practically nobody was listening to us when the index was at 3,000 points or so, when we strongly urged investors to buy.

That was a peculiar phenomenon... clients were in no mood to enter the market when valuations were at their lowest.

But after the initial fall, hasn't there been a further worsening of mood?

Well, when the market started falling, the first 500-700 points did make some sections feel that prices were becoming attractive.

That tone now seems to have changed a bit. In a manner of speaking, their body language is turning different now.

Also, it will not be wrong to say that the lay investor, having read and heard so much about the decline, is perhaps slightly confused at this juncture. In other words, the right mood has to set in before the market looks up again. Perhaps some thought needs to be given to the reasons behind the fall. I mean, a market like Turkey is said to be in a bad shape now.

One needs to see why this is so. Sitting here, we will not be able to get the answer.

Those tracking emerging markets may have some clues.

How are your distributors reacting to all this?

The more discerning among them are indeed seeking inputs from us... they are not looking for sourcing basic advice from funds.

Large banks, for instance, have developed their own advisory capacity anyway.

I think all distribution outfits are trying their best to make some sense of the current situation. And such behaviour is in line with expectations.

If there is one lesson in this, what will it be?

Although the stakes have gone higher for all of us this time, we need to turn to history for guidance.

I have personally seen Franklin Templeton's Prima Plus (introduced by the then Kothari Pioneer MF, the first private-sector player) being available at Rs five and a half...

I am alluding to what was happening in mid-1995.

The simple point is investors will have to hang in there and keep their morale intact.

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