Do you expect the euphoric mood of the stock markets to last much longer?
The markets have risen sharply for late; we believe they will consolidate around these levels. Retail investors will have to decide whether they are in the market for the long haul or the short term. According to us, the way to invest in equities is to have a medium-term view because that creates the maximum value.

Why has India suddenly become active on the global investing radar?
The indices are reflecting our economic reality. Globally, India is now counted among the fastest-growing economies, clocking over 6-per cent annual growth rates for almost a decade. Our demographic profile promises to sustain these rates over the next few years. The intention of the government is to strive for even higher numbers. When such a scenario unfolds the compounding of growth rates will create value over, say, a three-year period.

Over the last seven years Indian companies have generally been in restructuring mode to become more competitive on the global stage. The approach is more focused, with a greater emphasis on the quality of management and business. Successes in certain lead industries such as information technology, pharmaceuticals, auto components and textiles have resulted in several other sectors looking competitive from an export perspective. Little wonder, then, that overseas money is flowing freely into our markets.

Why has the retail investor gone missing on the current upsurge?
It’s true that this rally has not seen much retail participation; the money is flowing in from foreign institutional investors. Unlike in the earlier boom periods, retail investors seem to be averse to taking risks this time out.

In the past Indian investors concentrated on savings rather than investments. That has changed. Access to investment advice through the internet and individual advisors has empowered investors to plan by using sophisticated tools. Today they are utilising investment instruments such as mutual funds to plan their children’s education or their own retirement, which is why they not reacting to the new levels in the market. They seem to be more aware of their risk appetite and cash-flow requirements for the next 10 years.

We always encourage investors to invest through what are known as ‘systematic investment plans’. This means putting a certain amount every month in a fund of their choice (the amount could be as low as Rs 1,000). Investments of this nature even out the market cycle as one is investing irrespective of the index being up or down. This method of investment is fast gaining popularity, even with large investors.

Debt funds, once a flavour of the season, are no longer favoured. Why is that?
The recent hike in interest rates has affected debt funds. Within debt funds there are liquid funds, short- and long-term bond funds, and government securities funds. The first two have been giving reasonable returns and have not been significantly influenced by the change in interest rates; the other two have been impacted negatively. Typically, investors taking the long-term view have benefited; even a three-year period delivers decent returns. Risks and returns go hand in hand, since returns are a function of the risk one takes.

Tata Mutual Fund has been launching new funds aggressively over the last few months. What does this signify?
We have attained a critical mass in assets, from Rs 800 crore in 2002 to over Rs 6,500 crore currently. We have done this by pushing the right product at the right time. The Tata Equity P/E Fund was launched on May 17, 2004, on a day when the index fell by some 500 points. Our distributors wanted us to pull the fund out of the market, but we went ahead as we felt the product concept was fundamentally strong. We declared a dividend within three months of the closure of the initial public offering (IPO). This is, I think, unique in India’s mutual fund history and it created a positive sentiment in the minds of our investors.

With our Tata Dividend Yield Fund, we collected about Rs 400 crore through the IPO. Now we have launched an infrastructure fund which will leverage the growth in the infrastructure industry, a crucial component of the Indian economy. We believe that the timing is right. We are not aggressive for the sake for being aggressive; we have taken a disciplined approach. Our objective remains to create value for our investors. Only then will we earn their trust.

Why has India's mutual fund industry been unable to clock outstanding growth numbers?
The industry has not grown exponentially. Essentially, Indians have been brought up on government-sponsored savings products, which provided high, relatively risk-free returns. These have occupied the investors’ wallet share and are an important reason why our risk appetite is low. Surprisingly, even our awareness levels are low.

With the banking industry becoming the largest distributor of mutual funds, awareness and knowledge is slowly spreading. We are also penetrating larger geographies, going beyond the metropolises. For example, the Tata Dividend Yield Fund received applications from 50 cities across India. However, the mutual fund industry will not thrive if alternative instruments with high, risk-free returns continue to exist.

What is on the anvil as far as Tata Mutual Fund is concerned?
The recent trends have been heartening. We have more than 5 lakh investors now and the numbers are growing rapidly. We have positioned ourselves as a risk-managed fund house. Our product performance is in line with our investors’ risk tolerance and aspirations.

We are employing a lot of innovation in our processes and products. We are planning new funds that will focus on commodities and real estate. Also on the agenda is a fixed maturity plan for retail investors. Traditionally, this product is utilised for institutional investors. We were also the first to launch a dedicated open-ended fund for the infrastructure sector. Technology, an important driver of our business, is being employed to make transactions simpler and smoother for our distributors across the country. The future is certainly looking good.

More articles on Tata Asset Management:

Stocking it up:

The year gone by saw Tata Asset Management increasing its ‘assets under management’ from Rs 1,031 crore (as on March 31, 2003) to Rs 3,461 crore as on November 30, 2003

Uploaded on January 5, 2005