The latest entrants to the mutual fund industry have had a joy ride, with the equity market rising at breakneck speed. While lumpsum and SIP inflows have hit new highs, there are lingering concerns about corporate earnings catching up with market valuations. Ganesh Mohan, CEO, Bajaj Finserv Asset Management, spoke to businessline on the way forward. Excerpts:How has your one-year journey been?
It was a fantastic year and we closed July with an AUM of over ₹14,000 crore. We launched 12 products — five in equity, four in fixed income, and three in the passive space. We have 3 lakh folios at this point of time. Of course, there is lots more to do. Every product we have launched so far has some differentiation to offer. In Flexi Cap, we came up with the megatrend strategy, in large and mid-cap funds, we introduced moat investing, balanced advantage we brought in both fundamental and sentimental indicators as criteria for investment, in multi-asset we invest in companies that can deliver growth and dividend yield. We have about 20 people on the investment team and a presence in 120 locations. We have one of the highest rankings in the industry as far as risk adjusted returns are concerned.Do you think the market is over-heated?
We had a bull-run and positive return for eight consecutive years, which is very unusual. Investors should realise that equity investment cannot be a one-way street. They will get that reminder from time to time and it is quite healthy. Any fall gives investors a chance to re-look at their portfolio with a long-term perspective. We have to look at what point the market runs ahead of fundamentals; we do not see that happening in the large cap space as yet. We have seen a little bit of that in the mid- and small-cap space. Typically, during drawdowns, we have also seen mid- and small-cap stocks take longer to recover than large caps.Should investors go slow given the high market valuation?
I don’t think so. Many of the large caps have gone through a time correction and prices have remained constant, though earnings have grown 15-20 per cent. The current valuation of the large caps is close to their long-term average of 23.1 and they are currently near fair valuation. This makes them attractive for long-term investments. The study also shows that large cap stocks tend to decline lesser and recover their losses faster than the mid- and small-cap categories. Mid- and large-caps as a category are trading at slightly elevated valuations compared to historical averages.Do you see other developing markets attracting more than India due to their attractive valuation?
I don’t think Indian markets are overvalued, though they are trading at a premium compared to others. China needs to be looked at differently. The exact problem of the Chinese real estate market is not known. There has been a lot of off-balance sheet funding for these real estate projects. That is why the Chinese central bank and HNIs have stepped up gold purchase. Other markets such as Indonesia, the Philippines and Vietnam will see growth opportunities, but India will definitely stand out.How many distributors have you empanelled?
We have empanelled over 40,000 distributors, covering most of the active distributors in the market. This apart, we have tied up with most of the leading private sector banks and national distributors. There may be some banks which want three years of track record before selling our product. However, most of the banks which understand the Indian market, tend to look at one-year operations as the critical benchmark. We have been selective in opening branches. Investors and distributors have lot more digital ways to access us. We may need regional hubs to hold events and connect with distributors. There will be a lot more emphasis to provide digital tools to the sales team to be more effective.What is the progress on accessing your funds through WhatsApp?
It is one of our signature developments. We stated WhatsApp for empanelment of distributors. Since then, we have added full-scale transaction capabilities, including lumpsum, SIP, Switch, STP, SWP and redemption and information vault and partner services. We have two separate WhatsApp channels for investors and distributors. We wanted to connect with investors using the day-to-day functionality. Today, it is a complete transaction capability we have built.Do you see front-running cases tarnishing the MF industry’s image?
Any such episode does have its own effects. It is not something that we would like to have in the industry because it is illegal. As an industry, we all want to avoid that. That said, there have been certain episodes that have taken place in the past. Investors also get a little bit cautious when such incidents happen. It is not a good thing to happen. SEBI is also coming up with an institutional mechanism to deal with it. Institutional mechanisms ensure that AMCs put in the check points, with SEBI having oversight. We should ensure that these incidents are minimised because they are in nobody’s interest.SHARE
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https://www.thehindubusinessline.com/markets/investors-should-know-equity-investment-cannot-be-a-one-way-street-ganesh-mohan-ceo-bajaj-finserv-asset-management/article68542224.ece
