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Good at saving, bad at investing

Mutual fund heads say investor psyche needs to change and efforts are on to rope in more distributors and educate investors


BS  |  Mumbai 

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Short-term volatility notwithstanding, mutual funds are among the most-transparent investment vehicles. That was the consensus at the Business Standard Fund Cafe held in Mumbai on October 24. The chiefs of six leading fund houses said they were confident of MFs becoming the preferred choice for financial sector investors. The round table was moderated by Shyamal Majumdar. Edited excerpts:

Is the retail investor-fund manager disconnect hurting collection of assets?

A Balasubramanian: The compound annual growth rate (CAGR) of the MF industry is 19.8 per cent; for the insurance industry, 20 per cent. The average deposit growth has been nine per cent. I think the sector has done a fabulous job of growing its assets. There is a study by the National Research Council (NRC) which says of the 220 million households, 10 per cent invest in financial assets and within that 90 per cent have assets in postal savings deposit and other assured schemes. The balance is invested in capital market assets. That indicates the kind of opportunities that exist. In the next six months, I would say positive vibes would certainly come back, supported by a strong monsoon which would have a very good impact on improving rural income. In the US, we have seen the highest-ever inflows into equities, largely from money moving from debt to equities. That is another proof of the trend that is emerging. It will come to India as well, albeit with a bit of a lag.

Nimesh Shah: The investors do not understand that we are relative performers. That is, we strive to beat the benchmark. So, if the market goes down 20 per cent and the fund goes down 10 per cent, that's outperformance for us. Investors don't understand this; they always look for fixed-deposit (FD)-plus returns.testing.. we are here....

Milind Barve: We have a 24 per cent household savings rate and very low penetration of capital market products, which includes MF and insurance. From that perspective, I think India is an obvious market to be in. But it is not a market which is easy to penetrate. It requires a lot of hard work. You start a business and you became a part of the growth of the sector. If the awareness of a fund product is very low, you need to create a reasonable record of its investment performance and you start getting recognised by investors and distributors. Right now, we are getting influenced by what has happened in the immediate past where savings have come down. Bank deposit growth rate itself has been the lowest in the last five to six years. When people shift back to investing in financial assets, we will see investments coming back to mutual funds also.

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First Published: Mon, September 14 2020. 19:10 IST