The initial response to Rajiv Gandhi Equity Savings Scheme has not been very encouraging as about nine mutual fund houses have managed to raise only Rs 200 crore so far.
The fall in fresh investments has hit mutual funds in the last three months. The assets under management (AUM) of the mutual fund industry fell 1.5 per cent to Rs 8.14 lakh crore in February from Rs 8.26 lakh crore recorded in January. This was largely due to fall in equity oriented funds.
AUM under equity funds recorded the biggest decline in 15 months at Rs 1.76 trillion, down seven per cent from January. While mutual funds are considered as safe bet for retail investors, many of them have delivered poor returns over five years. However, Jisang Yoo, Chief Executive Officer, Mirae Asset Global Investments, is confident that regular investment in mutual fund will shield small investor from market volatility and deliver better returns. “There may be hiccups in the short term. But the long term of India’s growth story is intact,” he said in an interview with Business Line.
Has the redemption pressure eased?
I think so. Redemptions for mutual funds got exaggerated in January as the inflow shrunk. However, investments have started flowing back.
How do you see the MF growth?
It is going to be a difficult period for next two years given the economic uncertainty. Bridging the fiscal deficit, high inflation and slowing economy is going to pose a big challenge. Having said that, the long-term economic outlook still remains bright as the Indian economy is largely driven by domestic consumption. There are also signs of recovery in the US and European economy.
You completed six years in India. How is your experience been?
It has been very challenging and we are putting our best to overcome it. Before coming to India I headed Brazil operations. Mutual fund sector in Brazil is almost 10 bigger than India. Market structure is quite different in both the countries. Every State in India has a different mind set when it comes to investment. It becomes very difficult to structure a single investment product that will find acceptance across States.
Are investors convinced MF investment pays in long term?
It is a fact that investors are disappointed with a few funds underperforming their benchmark index. It will be difficult to get back some of these investors who lost money in a long-term product.
How do you see next fiscal for equity markets?
I have my concern for the first half of the next fiscal. The liquidity crunch, high inflation and RBI call on rate reduction will be the major factor playing in the minds of investors. However, the second half may appear better due to base effect.
What will be the impact of Rajiv Gandhi Equity Savings Scheme on the stock market?
Finding the eligible first-time investor for this scheme is going to be difficult task. There also scope for mis-selling by distributors and financial advisers as the tax benefit can be availed only if the annual income is less than Rs 10 lakh. The initial response has also not been very encouraging as about nine mutual fund houses have managed to raise only Rs 200 crore.
How do foreign investors see investment in India?
The premium India used to command over other countries has reduced significantly, of late. Foreign investors are waiting to plough in a corpus of $20 billion in developing economies, and Asia Pacific countries are the favoured lot. The political stability and strong domestic consumption may tilt the scale in favour of India.