ASHWANI BHATIA, managing director and CEO, SBI Mutual Fund, says the measures announced by the government will revive the economy. In an interview to GEORGE MATHEW, Bhatia, who manages assets worth Rs 3,07,533 crore, says the slowdown is a temporary event . Edited excerpts:
Are you worried about the ongoing slowdown in the economy?
Growth is never linear. The current slowdown in the Indian economy is a reflection of the economic cycle, global slowdown and the geo-political issues around the globe. We believe that the slowdown is a temporary event, and the government s efforts should help revive growth. Stability in other macro factors such as benign inflation, contained CAD, comfortable forex reserves and stable rupee reflect positively on India s long-term prospects.
Do you think the measures announced by the government will boost investments and growth?
The measures announced by the government last week such as corporate tax reduction, rolling back of higher surcharge on FPIs, capital infusion in PSU banks, credit support to SMEs and measures to boost auto sector demand will be a sentiment booster for the markets. These set of reform announcements will help in bolstering growth in the economy.
Has the MF industry been able to recover from the turbulence in the NBFC/HFC sector?
The turbulence in the NBFC/ HFC sector that has persisted for a while has impacted the risk tolerance of most MF investors. This has been reflected in the preference of investors towards products wherein the credit allocation is predominantly into high grade i.e. AAA/ sovereign securities. Products such as Short Term Debt Fund, Corporate Bond Fund and Banking and PSU Fund are positioned with a similar mandate and have seen good traction in terms of investor flows in the recent past.
Have you stopped funding NBFC/ HFC sector? Do you think the NBFC liquidity issue will impact MF sector growth?
We haven t stopped funding the NBFC /HFC sector. We continue to be extremely selective in allocations within the sector and the exposures are being reviewed continuously. We have also aligned scheme-level sectoral exposures in line with the reduced sectoral caps as announced recently by SEBI. We don t think the NBFC liquidity issue should impact MF growth as fund houses continue to offer solutions in line with investor requirements across equity and fixed income funds.
Many MFs had proposed roll-back of Long-term Capital Gains tax on equity MFs, but this hasn t yet happened. Do you think the government should consider this?
Investment penetration in India is still very low. Additionally, long-term investing trend is further low. To motivate investors towards investing and staying invested for the long term, we need to take different measures and promote it for at least the next 4-5 years. One factor that will help is the roll-back of the long-term tax on equity mutual funds.
MF industry s proposal for a Debt Linked Savings Scheme has also not happened. Do you think such a scheme will be beneficial to the MF industry and investors?
Debt as a category needs to be promoted among retail investors. There is a need to move away from traditional savings such as FD, savings account, and chit funds to market-linked investments, which will help the economy s development. We believe debt-linked savings scheme can help increase retail investor participation in fixed income market and help increase the depth of the debt market.
ULIPs offer tax-free returns whereas equity schemes are taxed now. Should there be a level playing field?
Yes, we think that there should be a level playing field among the two investment options. Further, we should look at a combination of two products for investors to get both insurance and benefits of mutual funds such as liquidity, transparency and a variety of products to meet different goals.
Debt funds have been showing high volatility of late. Do you think payment delays by NBFCs and HFCs will impact the value of schemes?
Payment delays or rating actions would have an impact on fund NAV and the resultant volatility is an inherent part of investment in any capital market-oriented product.
MF industry s AUM has not showed significant growth in the last three or four months. Are investors keeping away?
We do not think that investors are keeping away from the markets. We have been seeing strong SIP flows of around Rs 8,300 crore each month since the start of the financial year, despite market volatility and negative market returns.