The correction in markets is helping retail investors accumulate more number of units of mutual funds and build a big corpus for themselves through the SIP route, N S Venkatesh, Chief Executive of the Association of Mutual Funds in India (AMFI), told Himali Patel in an interview. Credit risk concerns in the fund industry has largely ebbed because of regulatory support and upcoming redemptions, he said.
What is your assessment of the economy and market after the government’s stimulus measures?
Indian equity markets have seen harsh corrections due to the pandemic.
However, our government has risen to the occasion. Atmanirbhar plan as a dynamic mantra, and the
`20 lakh crore package will help the economy resurrect in the coming quarters.
As far as Mutual Fund (MF) industry is concerned, it is heartening to note that retail investors continue to demonstrate mature investment behaviour. They continue to repose confidence in equity mutual funds, as reflected by robust monthly Systematic Investment Plan (SIP) contribution. Even the debt side has seen a steady rise in the net flows as investors are shifting towards high-quality AAA-rated debt in view of the trend of reducing interest rates.
Credit risk concerns have ebbed, following regulatory support, and with redemptions coming down, we could see investors allocating higher quantum of savings to schemes having high-quality debt paper.
What is your view on SIP flows? Will they continue to breach `8,000 crore threshold in the given scenario?
Allow me to respond a bit differently. Equity markets have been at their peak of uncertainty and volatility and reigned supreme in the last 18 to 24 months. Against this backdrop, it is important to observe the behaviour of retail investors. SIP contributions have risen and now have been breaching the threshold of `8,000 crore plus. Even in the last three months of COVID-impacted economy, SIP contributions continue to be robust. Investors have realised the importance of staying invested, not getting distracted by these events and keeping their long-term goals as the objective to decide on their investments.
If Investors stay firm, they stand to gain from the ongoing market developments and build a sizeable corpus that can help them achieve their financial life goals. Let us not overlook the fact that each of these crisis events leading to market correction, is helping investors accumulate more number of units at lower net asset value, through the SIP route. These investments will make a big difference to the investor corpus when the market rebounds in view of the inherent strength of the economy.
What should investors opt for between equity and debt MFs? Will you reassure investors to continue investing in equity funds even though the bulk of them have hit the bottom in terms of NAV?
Debt schemes serve as the best investment vehicle if your investment horizon is between six months and three years. Risk averse investors can opt for debt schemes, which have high-quality AAA paper, like corporate bond fund, or banking and Public Sector Undertakings (PSU fund), savings fund. In fact, MF Industry is offering SIPs into high-quality debt funds too.
Investors should opt for equity funds if their investment horizon is for a very long term. The best approach would be to invest periodically through goal-oriented SIPs into chosen equity schemes.
AMFI BCG report last year had set a target of achieving `100 lakh crore AUM and 10 crore investors. Has that goal post changed in the
given scenario?
The goal post has certainly not changed. At worse, the MF Industry may now take a bit more time to arrive at the goal post. However, increasing awareness of mutual funds coupled with ease of onboarding newer Investors, thanks to increasing adoption of technology, will hopefully help the industry achieve that target, earlier than envisaged.