Domestic investors will become a force to reckon with

Despite the continuous rise in the monthly asset under management (AUM) of the Indian mutual fund (MF) industry, the retail penetration is still a matter of worry for various asset management companies (AMC). In an exclusive interview with FE?s Akash Joshi and Chirag Madia, Sundeep Sikka, CEO, Reliance Mutual Fund, says that they are taking several initiatives to bring in more and more numbers of retail investors to the MF sector. Excerpts.

In the past few months, total asset under management (AUM) of Reliance AMC crossed Rs 1 lakh-crore mark. Do you think post September-October crises in the global economy, worst are over for the Indian MF industry?

I don’t think that the tide has changed. On the positive side, we have seen mutual fund becoming a skeptical word across the country over the last four to five years. Earlier, we used to introduce ourselves to the interiors of the country. However, this is not the case now. This infusion of retail participation is a long-term process and it will continue and MF penetration is currently only over 3%. So we are very bullish for the long-term and MF industry has a long way to go. Events like election results will always come in future and they might be negative or positive for short-term, but long-term journey has started.

Penetration in MF is low and everybody wants to grow. Even on the market side, sections such as foreign institutional investors (FII) are dominant players. At a time when mutual funds can be a dominating player, what are the initiatives your AMC taking for more penetration?

We have been looking at the tier-III-IV cities a lot and if we look at the figures, 60-70% of the AUM still comes from the urban areas. For the last four-five years, we have been going to smaller cities and towns, where people are not even aware of what the mutual funds are. Our main initiative is how to channelise the house-hold saving in the Indian capital markets and MF is going to be biggest source. Apart from that we have taken various initiatives like launch of micro-SIP and we have received tremendous response from there. We have also started an in-house learning academy called EDGE and its main aim is to take MF more and more number of investors.

What are the regulatory aspects which can make a difference?

From the regulatory point of view, I don’t think any major changes are required as we are going in the right direction. The only major thing is investor’s education and regulator along with MF players will continue doing investor’s education programme.

Coming to the equity market, where are we heading towards?

Post-October crises, things have started to change, even a political instability was there around during that period. I think major change that has taken place is that, the liquidity condition in the market has improved, where people have started to take the risk. I think the biggest boost to the market is the UPA’s coming back to power for a second time consecutively with clear majority. We keep telling the investors not to look at the short-term view. If we take the vision for the next 5-10 years, then we are very bullish on the markets.

From the MF perspective, what new products and services can we expect?

It is very important for the industry to realise that it is not only about launching the products, but it is about the launching right products are the right time as well and we are clearly witnessing the industry maturing at that. We have not seen lot of new fund offer (NFO), however we had launched Reliance Infrastructure fund. I would like to say that, we had got the approval to launch the product 15 months ago, but we did not go away to launch we thought the market valuations were too high. We led this approval lapse and again applied it, just before the elections got the approval, waited for the election results and when the results were better than expected we launched it as we thought new government will focus more on infrastructure products. So coming to this it is very important that, not the question of just launching new or innovative products only for sake of launching. These products can be launched only at that time, when the need arises.

What kind of products can we look forward to be launched from your fund house?

We have filed two-three products, one is index funds and gold fund also. Again when we will be launching we are not sure because, as I said, we will be launching the product at the right time.

In the past few month we are witnessing increase in the number of AUM, but not much inflows are coming in the equity schemes. What do you think about it?

I would like to give you the example of Reliance MF. Over the last one year, we had seen our AUM touching Rs 1-lakh-crore mark for two days and that time markets were at peak. Again we have touched that mark in May, when markets were down but inflows are coming in certainly coming in.

Apart from that, we look at the retail investors, investing below Rs 10,000 we have seen a decent growth. We have to understand that, MF right now is at very nascent stage with only over 3% of participation. We believe that domestic investors will become a force to reckon with in the times to come.