We have seen a lot more new inflows coming through and that is helping the gross inflows, says Krishnakumar S, Head — Equity, Sundaram Mutual Fund, in a chat with BusinessLine . Excerpts:

What are the performance highlights of Sundaram Mutual Fund in the recent past?

We had growth in assets and our equity assets have moved to about ₹6,400 crore now, from about ₹5,000 crore a year back. Of the ₹5,000 crore, about ₹2,500 crore is in the mid- and small-cap funds. In the last six months, this part of the assets that grew faster than the broader markets.

How have your returns panned out?

MFs’ returns in the last one year have been good for Sundaram. All our schemes have outperformed the benchmarks this year. Our family of micro-cap funds have delivered 65-70 per cent year-to-date returns. Our Smile Fund has delivered an annual return of 90 per cent plus while the Select Midcap has also performed well and has been beating benchmark returns consistently since inception.

Will this trend sustain given the volatility in the market?

Typically, in any inflexion point of an economy in the market, the first year definitely gives one of the biggest returns across most stocks. Then the broad returns will normalise and the market will tend to consolidate and reflect the trend in the economy. However, a good stock selection is bound to help in the outperformance of fund managers.

Sundaram MF has been creating wealth for its unit holders through a bottom-up investing style.

Do you see any redemption pressure now?

Redemption pressure has come down significantly as compared to six months back. In the last two to three months, there has been a decisive change in investors’ behaviour. We have seen a lot more new inflows coming through and that is helping. So, overall, gross inflows have picked up sharply.

Where do you see action going forward - in mid- and small-caps or large-cap space?

In an economic upcycle over the three-five year cycle, the mid- and small-cap space will deliver superior returns than the large-caps.

However, if one were to stretch this and look at it from a longer term cycle of 10 years or a bull and bear market combined that we had seen in 2003-13, dispersion in returns across market caps is a lot lower.

What are your Budget expectations?

Revenue maximisation is something that one should watch out for. That may come from things such as stake sale of the SU-UTI undertaking or aggressive PSU divestments.

These two could itself garner ₹50,000-70,000 crore this fiscal, which will be a big boost.

From the capital market’s perspective, we need more measures to deepen and widen the markets in terms of opening up limits for debt to external investors and creating incentives for domestic investors to invest in equities with a longer term perspective, such as carving out a separate tax exemption for equity investments and tax benefits for retail investors instead of having ₹1 lakh limit with all subs-Sections.

Do retail investors need to stay put or shift through schemes during volatile times?

It is always very important for investors to stay through with their investments. It is very difficult to time the markets. My advice to investors, based on our own internal data, is that even if people miss investing on the best days in the market and come on days when the market is probably at a high, still if they hold investments over a cycle, they stand to benefit from equity returns. So, equity is an effective asset class, which can deliver good returns if held for a long period of time with patience.

What could be a threat to the bull rally?

There could be definitely some short-term challenges. Monsoon failure is staring at us. The other could be the tensions in Iraq. However, from a two-three-year perspective, we do not foresee these two derailing the story.

comment COMMENT NOW