The Hindu Business Line : `Retail investor started paying attention only when Sensex was 12,000 and beyond'

It is easy to blame distributors of mutual funds in a market that is often dominated by unreasonable behaviour on the part of investors, feels Mr Sameer Kamdar, National Head - MFs, Mata Securities.

"Distributors are remembered when something goes wrong in the MF business", he adds even as he dwells on such issues as outflows from funds and the conduct of retail investors.

Excerpts.

About Rs 10,000 crore has moved out of funds as on end-June. As a distributor, how do you view the drop in assets?

Several factors added up to culminate in what happened at the end of the last quarter. I am referring to the relatively weak sentiments that ruled the stock market last month.

A large amount of money was moving out of fixed income funds, chiefly because of a step-up in interest rates, advance tax outflows and shifts in bank deposits.

However, despite all these factors, we are still urging investors not to read too much into this... after all, the assets under management (AUM) of all mutual funds taken together was growing rapidly till recently.

At least that was the trend seen when the AUM zoomed from Rs 2 lakh crore to about Rs 2.6 lakh crore.

That increase was largely on account of NFOs, right?

The new funds did play a major role, and there were a number of them. That has now changed, as it is clear from the absence of open-end equity NFOs. No money is now being collected through that route.

The equity market has gone down from its recent peak and this has been reflected in the general sentiment.

On the fixed income side, the only discernible activity is on account of liquid and other short term funds. A number of fixed maturity plans have also been launched by the funds industry. This is an area dominated largely by institutional investors.

Talking about institutional participants, how do you see the proposal to cap corporate exposure to funds?

It has been argued that in the current situation, corporate allocation is doing more harm than good insofar as the retail investor is concerned. The reference is to the view that when corporate money slushes about too much, the long-term prospects of retail investors are jeopardised.

However, there is a simple way out. I am talking about separating retail and institutional portfolios. If this is provided for, I don't know why restrictions should be placed on corporate money. If you recall the erstwhile inter-corporate deposits market, you will recollect why it was doing well. However, there were certain incidents that spooked sentiments. Let these not be repeated in the MF domain.

Is the retail player ready to turn to funds again?

Investment psyche is very important for this segment. Till the market was going up to 10,000 points, the ordinary retail investor showed only passing interest. He started paying attention only when it was 12,000 and beyond.

Now, this behaviour is quite strange... only during the last leg of the rally was the average investor interested in it. I remember that there was little response to an advisory we issued at the time when the market first fell to 9,500-10,000 points, pointing out that there a 20 per cent upside was not improbable.

And now that it has gone near 11,000 points, people are asking us again for guidance. There is no way such conduct can be rationalised.

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