What is your outlook for Indian equities
The equity market has been range-bound for the last 15-18 months and is down about 5.4% from the high it touched on February 21 this year. The rupee has weakened considerably in the last six months as well. FIIs are not buying at this point in time but the Indian market today is effectively 25-30% cheaper compared with what it was six months back. Somehow, there has been a lot of negativity about how things have been moving in the economy. But any country that has gone through a secular bull run is bound to go through such phases. So I dont think there is need to get too worried.
What are the key positives for the market
The biggest positive is that everybody is negative. As far as we are concerned this is a good time to invest as there wont be much downside from here. There may be headwinds in the near term but our long-term story is very much intact. We need to be positive. Theres nothing wrong with growing at 6.5% or 7%. We are a victim of the high expectations that we created for ourselves. We started believing that nothing less than 9% will do. Even Chinas GDP growth is slowing down. I do not belong to the camp that believes that everything is over in India.
What is the outlook on FII inflows
In the current scenario one cant really expect too much overseas inflows into India. Investors based in countries that are facing growth issues have not been investing in India. But investors in other parts of the globe who do not have many options are coming to India. Also, we have seen a lot of interest from serious investors such as pension funds. Our long-term growth story is intact and we will continue to attract long-term money, which is far better than getting hot money.
About 1.5 million retail folios closed in FY12. Are you concerned about these numbers
There are two parts to the story. A lot of investors had entered the market during 2007-08. Some of these investors made money and booked profits during the past year, while others who didnt make any money even after a long wait decided to move out. So, on the one hand, the industry saw redemption, which is part of a normal process based on the needs or goals of an investor. On the other hand, inflows have slowed down. Whats important to understand is that the performance of the underlying market does impact new inflows. But one must remember that while investors have been moving out of equities, they have been investing in debt.
What is your advice to retail investors
Retail investors should not let too much panic impact their decision making. Investors should ensure they have the right asset allocation and invest at regular intervals. Somehow, investors tend to get underexposed or overexposed to a particular asset class. The asset allocation should be tailor-made for the individual. If he is already invested in bank FDs, then he should get into equities and gold. If he is invested in gold, he has to invest in debt and equity. This is important since different asset classes work at different points of time. For instance, between 2008 and 2012 equity market has been flat but gold has given stellar (about 300%) returns. Debt has given double digit returns in the past 2-3 years, which has not happened very often in the past.
What are challenges faced by the mutual fund industry
Only 2% of the countrys population is currently invested in mutual funds. Its a challenge as well as an opportunity. The biggest issue is the lack of education and awareness. Also, Indian investors dont understand the advantage of staying invested for the long-term. This mindset needs to change.