India is realizing the power of SIP's in Mutual Funds

Written on Thursday, May 12, 2016
By Bajaj Capital Group

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In an interview with Bloomberg TV India show "'In Business'", VC & MD, Bajaj Capital - Mr. Rajiv Bajaj, shares, where the mutual fund industry is heading, what is the reason of increasing equity inflows in the year 2015 - 2016 and the factors influencing this growth. You can also read the full interview below -

How has been the trend as far as Mutual Fund is concern?

Mutual Fund inflows are positive and consistent from last past 24 months, what had happened that regime changes in the center have brought back the investors confidence . Investors, as we say, always have money, whether they want to park the money or they have the confidence to take it out of the bank and put it in other more productive avenues. So last 24 months, barring one month in March the flows were positive. This trend has started off well in 2016 and there is no reason why it should not build going forward.

Other Asset Classes are not doing well, do you think this could be the reason for stronger flows in Mutual Fund?

Definitely, there is no alternative really, Real estate is down and is expected to be down for a continuous period. So if last decade belongs to most of the wealthy investors and aspiring investors, if they made money in Real Estate. In the next decade, it is believed that it is the financial market where the money will be made. Now in financial market the Bank deposits rates have been slipping down, Postal Saving Schemes rates are coming down. The avenues where fixed return investors should put money are shrinking and with Gsec it is expected that it will moderate further. So people are realizing that they need to look at Debt Funds as an alternative vehicle.

The investors who have the long term goals to achieve like Retirement or other long-term financial goals which are 5, 10 or 15 years away and that's the beauty of equity kicks in. So I would say that , two factors which brought strong flows into Mutual Funds are increasingly positive economic scenario, that's the first reason and second is that there are no avenues really where other investment avenues are shrinking.

When you say the different type of funds, which fund do you think have strong inflows going ahead?

We are Retail wealth management company and for us the jewel in the crown is the equity fund flows and they have been increasing steadily. For the Industry as well as for us, the SIP Book, people are increasingly realizing the importance of regular, disciplined way of investing and they don't want to really try and beat the market because nobody has even beaten the market, in the short term at least. People are realizing that strategy of investing in the market is more important than to time the market. So that is why the SIP Book, today almost 3000 crores of monthly flows and 1 crore SIP's in India. So that is really contributing to the asset build up. In addition to that, we are seeing that investors are coming into accrual based funds as well as medium term duration funds. And of course, people are parking their short term savings in Liquid Funds in preference to saving the account, so that they can get 2-3% more and why should they be losing it.

What kind of AUM Growth do you foresee for the Industry and for your company?

We are the part of the Private Mutual Fund Industry since the beginning, last 5 years trend has been approximately Mutual Fund Industry to growth expected around 15%. And if you see last 2 years trend , 2014 – 2015, the growth was 24-25% and in 2015 – 16 it is 20%, so we are benchmarking our growth at the same level. Now we are working on the strategy that how we can actually beat the Industry growth. We have an online platform which we have just launched and that should help us accelerate our resource mobilization in Mutual Funds.

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