With the markets continuing its steady progress ahead and the sentiment improving for the better, fund managers seem to be getting optimistic again. Navin Suri, CEO, ING Investment Management, spoke with Akash Joshi of The Financial Express on what he thinks about the market place and also about the fund’s plans. Excerpts:
The market is now looking to move positively. What is your take on the situation at the moment?
The signs are indeed positive; the advance tax numbers look good and indicate that one can expect a 10 to 15% growth in corporate earnings in the quarter. And this again will have a positive impact and we see the market growing over the next 10 to 12 months.
Now the pace may vary, but there will be growth. Also the indication from the central bank that they will not touch the rates till January is also a good thing for fixed income investments and from a four to five months perspective, short term funds look attractive at the moment. Moreover, despite the climate scare, we expect the economy to grow at 5 to 7% and there is enough liquidity in the market to stay positive.
Now, Indian corporates seem to be on a fund raising spree. Do you think the IPO, NCD and QIP issuances will dry up the market of liquidity and cause grief in the secondary markets?
No, I don’t think so. There is liquidity in the market and it is looking at accesses to invest in. So good companies making issues will be accepted and it will not have an impact on the secondary markets. Importantly, the risk appetite from investors is also on the rise. This is also a positive factor. Earlier on, when the markets tanked, the risk appetite had taken a hit and this was detrimental.
Now, things have changed. So I think that liquidity will not move out in a hurry. There is enough systemic liquidity around. Now, look at this case. Indian markets take cues from the US. Ever since the global meltdown has started the savings rate in the US has gone up from around 1% of the GDP to around 7to 8% and this is around $800 to $900 billion of money. This will have to be deployed and India will be a favoured destination. So the IPO, NCD and QIP market can easily absorb around $4 billion.
What are the sectors that you are now looking at actively?
Clearly, there is a high opportunity in the domestic consumption story and therefore, the sectors that feed this are set to gain. We are also looking closely at some of the export opportunities. This is because as the US economy revives, and it has shown signs of a revival, then these sectors will start looking attractive again. Also, at the moment, the auto numbers look good. Moreover, there is the rural demand that is likely to keep fuelling growth. So these are some of the areas that we are looking at.
Now, there has been a net outflow from the assets under management, especially in the equity funds. How detrimental is this for the industry and do you see this happening as an impact of the ban on entry loads?
Some amount of outflow from equity funds is not a cause for concern. In fact some outflow is actually healthy for the sector. As per the ban on entry loads, directionally, I think it is a positive move and is the right step. Now there has to be cultural change from sales-based advice to advice-based sales. This was an embedded culture in India and this will really help investors take the right decisions rather than the distributors advising them and getting commissions based on the churn of funds.
The independent financial advisors will now have to clearly elevate their standard of service to earn their commissions from investors. This is one of the reasons we have started the IFAN, a web-based platform to enable our advisors. So you will eventually see low cost distribution models emerging into the Indian market like on the lines of a Smith Barney or a Charles Schwab. We already have around 280 advisors who have signed up with IFAN and they can access the site to upgrade their skills and offer quality advice.
What about ING Investment Managers? What is the plan here?
We will be looking at three key business lines. One of them will be the IFAN which is largely a BtoB initiative. And then we have the portfolio management services (PMS) and here we have developed strengths in the areas of quantitative model based portfolios. Here, the investments are done based on algorithms that have been tested in the market place and investors can generate strong returns based on these models. We have been successful in this area and look to launch three more products by February 2010. And then there is the fund of funds business that we are closely looking at growing. When investors change from a fund to another, there is a cost involved. Now with funds of funds the risk and the cost of operating a portfolio of funds gets reduced drastically as we will be investing in several funds at the same time.