'Sooner than later, India will begin to attract risky capital'<http://www.business-standard.com/india/storypage.php?autono=355236> Q&A: A Balasubramaniam, chief investment officer, Birla Sunlife Anju Yadav / Mumbai April 16, 2009, 0:56 IST
[image: A Balasubramaniam]Birla Sunlife Asset Management has been one of the consistent performers in the stock market. It was one of the few fund houses to see a rise in its assets under management during the last fifteen months, even as markets saw a sharp fall in the same period. *A Balasubramaniam,*chief investment officer of Birla Sunlife, speaks to *Anju Yadav* about the performance of the industry and its outlook. Excerpts: *Though everyone believes that India may not suffer as much as the US and European economies, our markets continue to languish because of adverse sentiments. When do you see the mood changing?* Despite all the issues that are the global economy faces now, India has remained relatively insulated from the rest of the world as far as economic growth is concerned. The growth rate here remained above 6 per cent and is likely to be in the range of 6-7 per cent, given the domestic-driven nature of our economy. We feel India would, sooner than later, begin to attract risky capital in the form of both portfolio flows as well as foreign direct investment flows on the first sign of a stability in global financial markets and a reasonably good visibility on the election outcome in May. *Market experts say that mutual fund houses are sitting on almost Rs 60,000-70,000 crore in cash. When is this cash likely to be deployed?* During the period of uncertainty beginning September last year, equity schemes across the board, including ourselves, had increased cash levels. This strategy has really paid off in terms of keeping the net asset value (NAV) protected from the market volatility. However, we began to reduce our cash levels across our equity schemes in the month of February and it now hovers at around 10 per cent. At the same time, deployment of cash from equity schemes would be largely driven by opportunities that exist in the market after taking into account fundamental valuations, near-team outlook on the overall macroeconomic and other technical factors, such as flow of funds, etc. *Insurance players have managed to garner a lot of money through their investment schemes. Mutual funds, as a result, have lost the first-entry advantage. How does the industry intend to tackle this?* The mutual fund industry has been growing consistently for more than a decade now and is likely to remain a strong investment vehicle for both retail and large investors. At the same time, the insurance industry is also poised to grow substantially, given the low penetration levels. Both industries cater to the different needs of consumers and, hence, both industries will have their own growth paths in terms of servicing the large investing public in India. *The market watchdog Sebi is not comfortable with structured schemes, like Capital Guarantee Schemes, because it feels that Indian investors are not savvy enough to understand them. What is your opinion?* Structured products are one of the alternative investment options for those investors who are either over-exposed to a certain asset class, or for those who are yet to diversify into products like equity. There are investors who are very conservative and remain invested in fixed income products. Structured products like Capital Guarantee Schemes serve the needs of such investors who do not want to take too much of risk by protecting against capital erosion. These products have got their own shelf-life as long as they are structured in line with Sebi guidelines and the underlying risk is insulated from the investors’ perspective. *Rates of certificates of deposit and commercial papers are slipping. There are expectations that RBI may cut policy rates further. Do you think more money will move into gilt and income schemes?* The interest rate fall in short-term money market instruments is in line with our expectation. Most of our portfolios had been positioned in the month of March itself to take advantage of this scenario. However, the increase in short-term liquidity in the month of April due to maturities of government securities and a poor credit off-take will find its way into shorter tenor government bonds. We also feel banks would look to increase their exposure to SLR securities, given the low risk-reward on corporate lending at low rates. Therefore, we feel that, in the near term, income funds/medium-term bond funds will outperform ultra short-term bond or liquid funds. *Which sectors are expected to outperform the market this year?* We feel that there will be a revival in interest rate-sensitive sectors like auto, construction. telecom and banking. They would continue to be the better performers even going forward. We also feel that, in the near term, the cement sector will do well. *Are retail investors still investing in SIPs and MIPs? Or are they still waiting for markets to recover?* We, as a fund house, have seen retail assets growing at a much faster pace as compared with our historical growth rate. We have witnessed solid inflows last year by promoting SIP under Century SIP product. We have also seen a reasonably good growth in SIP additions to our other equity schemes on the back of our continuous drive in promoting long-term savings in equity through the SIP route. MIP, as an asset class, has begun to gain recognition and importance during the last six months due to falling interest rates and a defensive and controlled exposure to equity. *How are the two India-specific funds – India Advantage Fund and Excel India Fund – performing? Have NRIs’ interest gone down as the market is not doing well, or are they showing the same level of interest?* India Advantage Fund and India Excel Fund are our offshore India-dedicated, diversified equity funds. While NRIs can invest in our domiciled equity and debt funds, they can also invest in our offshore fund, that is India Advantage Fund. The fund has generated more than 16 per cent CAGR (compound annual growth rate) as of 27 February this year as against the Sensex’s CAGR of 10.20 per cent for a 10-year period. The fund is the 11th best performing equity fund out of 6,302 funds all over the world on the basis of 10-year annual compounded returns for the period ended 31 December, 2007 (Source: Lipper). We feel, given the strong long-term performance and the edge India still has over the rest of the world, NRIs and overseas investors could look at taking an exposure or increasing exposure to Indian equity through our offshore funds as well. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
