‘Retail investors should not be bothered about investment cycle’

The way we see it,products are not normally launched in a market cycle. Our advice to the investors,irrespective of the market cycle,would be to keep investing in a regular and a disciplined way and the best investment for them would be in SIP or systematic investment plan. Irrespective of anybody who has invested in an SIP for a longer period of time,five or ten years,and irrespective of when he started,they will still have made money. Retail investors should not be bothered about investment cycles.

What is the penetration of MFs in tier II and tier III cities?

If you look at the industry,80 per cent of investors are institutional/debt,and within debt also 50 per cent clients control 80 per cent of them. We clearly believe that for the long-term growth of the mutual fund industry,we need to reach out to smaller towns. 80 per cent of the assets of companies are in top 10 cities. Let’s say your market share is 15 per cent. As you go to 50th city,the market share goes to 25 per cent,as you go to 30th city the market share goes to 35 per cent as you go to 200 cities it goes up to 50 per cent. That is what we are trying to do. We are also educating investors and launching simple products like the gold fund that we launched recently.

MFs invest in about 750 firms from a universe of 6,000-7,000. Is this trend of chasing select companies pushing up the stock prices of these firms?

We have to see it in a different way. There will be some companies which depend on the weight of the index. Institutional investors will always go to these companies. Our objective is to have a deep coverage of small companies. So we roughly cover 400 to 500 companies… many of which are not covered by any broker or any institutional investor. Our objective is to find the unexplored. Now,many new trends are emerging. Six years back you would never have expected a pizza company to be listed. Today,you have Domino’s and Cox & Kings listed.

Now that foreigners can invest in Indian MFs,are you planning to launch schemes that aim at this section?

You don’t have to launch a new scheme for that. But we are very excited about this opportunity and we are working on the distribution strategy. On the operational front,we are working with Sebi and Amfi. Now,we are working on a global distribution strategy.

What is your distribution strategy with the regulatory mechanism banning entry load? Any incentives for distributors?

Yes,because of entry load ban,the revenue available with distributors has come down. But when a distributor is advising an investor he cannot see MFs in isolation,he has to see the overall portfolio. Even if the distributor is selling MF,he also sees the opportunity to sell insurance and various other products. The right way for the distributor to see these (regulatory) changes is how much is he servicing the investor and gaining from the overall portfolio not just the MF.

Is there any plan to consolidate your schemes? Can we expect to see consolidation of funds across industry?

Different schemes have different mandates. But yes,as and when we believe there is a case,we will be merging the schemes. We had Reliance Equity Advantage which we repositioned because the portfolio mix and the mandate to invest was similar to some of the other schemes. And it is also in the interest of companies to consolidate small schemes because it is difficult to manage them. From the industry point of view,the number of schemes are,I think,about 400-500. There are funds which are less than Rs 100 crore and that doesn’t make sense.

What are your views on the best sectors for investment?

Within the sector,we have the banking and infrastructure funds. The two can have cycles where the industry might do well but not in the short-term. But in the long term,if India has to do well,both will have to do well. Sector schemes are only for market savvy investor because it is high risk and high return. The financial sector i.e. banking and infrastructure is my favourite.