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Compared to 2021, the mutal fund industry grew slower in 2022. What was the cause and how do you see 2023?
We saw some withdrawals coming from corporate treasuries. As far as equities are concerned, we continue to see momentum. But that momentum in equity got a bit reduced only in the last three to four months. I would assume it is a function of volatility that continues to exist in the global market. And then second is that as one starts looking at the return, it is a moving number: one year it does very well, another year it doesn’t do well. And if you look at the longer term, it does very well, no doubt. But customers also get influenced by the short term performance output. Therefore, they also have to take that call of reducing exposure and so on and so forth.
So that’s why I think we didn’t see de-growth.. We can say that the pace of growth was marginally coming down, not that it was significantly low. But mutual funds are gaining more and more acceptance and popularity and people have greatly understood this vehicle to meet their long term goals. In 2023, I see an increased par- ticipation in the capital market through the mutual fund and the SIP way of investing will become more the order of the day.
Sectors you think will do well in 2023
There are multiple factors at play for different sectors to perform well. Firstly, there’s generally the wide- spread increased activity levels in the economy, which reflects on the banking credit offtake, which is today higher than the deposit growth. So basically the financial service industry, which participates in it, would potentially do well this year. Other sectors that are expected to do well are capital goods and consumer durables.
Indian market vis-a-vis the global markets
The Indian market has been quite resilient in multiple areas. On the policy framework, we are far better. There has not been any policy goof up and whatever is happening has been only progressive in nature, supporting in nature. Secondly, GST collections have been rising month on month and tax collections have been growing at about 28%. I think we are far better compared to the damage done by Fed aggressive rate hike cycles, which is also pursued by the Reserve Bank of India but in a moderated way. Currency wise, we also let the rupee depreciate, but I think it is very orderly. And despite the currency depreciating, I think we still have reasonably good forex reserves and the earnings of the companies are far better. Lastly, the banking sector is today well capitalized. Probably they’ll have enough capital with them which can help them grow the business for the next two years without raising fresh capital.
Your take on Sebi allowing the launch of passive ELSS schemes last year
Active funds generally tend to outper- form the market. If you are an investor you have to see if you are happy with normal returns that come from Nifty or more than nominal returns that can come from active management. As a fund house we are duty bound to give choice to investors. But since there can be one scheme, we as a fund house can- not offer that. We have been offering ELSS since 1994, and there are many people who have made substantial money in our schemes. While fund houses have a choice to- day but some are not going for it given the fact they also have the capability to build a portfolio that can outperform the market over a period of time. Only those who are actually focusing on pas- sive funds and don’t want to have other things in actively managed funds may look into it.
Mutual funds are gaining more and more popularity and people have greatly understood this vehicle to meet their long term goals
-A Balasubramanian, AMFI Chairperson, MD and CEO, Aditya Birla Sun Life AMC
View on debt space for investment right now
The space looks very attractive. In the year 2022, interest rates have gone up from almost four and a half percent to about 6.25% today. Corporate bonds are going to be almost 2.5%. So this is a substantial movement that you have seen in the year 2022. To have more than 2% increase in rates, I think makes it more attractive from an investment point of view. Our own belief is the current rate regime would at least stay for about an 18 month period.
Challenges faced by Aditya Birla Mutual Fund last year
In the last two or three years, the markets have gone through their own challenges. The one challenge was the credit market crisis. During that period, what is most important is actually how well you underwrite your investment in terms of debt. And it got proved right on our underwriting capability too. We managed it quite efficiently despite the whole financial market going through a very rough time for about a year. And post pandemic again, we continued to stay bullish. However, while we continued to keep our focus on growth portfolios, most of the growth stocks last year got a hit thanks to the global volatility. And we also have to pay some price on that in terms of getting hit on those growth styles of investing, which again had to be revisited. We ensured that wherever we are a bit overweight on those sectors, where the risk is high is corrected.
Initiatives lined up by AMFI on increasing MF penetration in 2023
The penetration has been rising. I think the way I see it is the contribution com- ing from the deeper parts of the country through the geographical expansion, which the mutual funds have been doing has been on the rise. AMFI wants to take mutual funds to the masses. It wants to make investors understand how important equity is for them to generate wealth for the long term. Fixed income is another asset class we will promote. We have already created a few models and added more distribu- tors. Currently, the mutual fund in- dustry has 3.5 crores unique customer base. We want to see it cross 10 crores. Therefore, taking mutual funds to the masses is our agenda this year.