IFAs help bring in disciplined approach: Saravana Kumar of LIC Mutual Fund

Current trend suggests SIP culture is taking roots among investors however it has a long way to go

By Jinsy Mathew  
Monday, June 13, 2016

In conversation with Jinsy Mathew, Saravana Kumar, CIO of LIC Mutual Fund discusses on issues why the mutual fund has been in spotlight over the past few weeks and his take on the road ahead for markets

Independent financial advisors (IFAs) have been the talking point over the past few weeks. According to you, how important is IFA in mutual fund landscape?IFAs importance cannot be undermined as still in majority of transactions IFAs are driving force. Financial investment decision making is a complex process. Sometimes investor's are overwhelmed with availability of options  and they need handholding in choosing what is best suited for them. IFAs play a key role in motivating investors, understanding their needs and recommending a suitable product for them. IFAs help bringing a disciplined approach towards investing which a key for long term wealth creation.Would you consider mutual fund to be an overtly regulated product?

Mutual fund is a regulated product and rightly so as investor's hard earned money is involved and proactive regulations eliminate chances of creative frauds from duping innocent investors.

Is direct plan the way ahead?

Recent trend in Mutual Fund industry shows; direct plan is a hit with investors who are financially and tech savvy. Investors are becoming aware of costs and reduced costs are driving a section of investors towards adoption of direct plan for investing. I believe direct plan would be one of the options to be provided along with traditional route for investing.

Do you think the SIP culture has taken root among retail investors?

Experience of past few years has made investors realize importance of systematic investing to long term wealth creation. Industry's marketing machinery has worked hard to inculcate habit of systematic investing in investor's mind. Most investors who earn regular monthly income prefer to participate in equity markets using monthly installment styled product and SIPs have been hit among such investor class. Current trend suggests SIP culture is taking roots among investors however it has a long way to go. It looks like SIP culture is just in initial stages.

What is your medium term outlook on Indian equities?

The outlook for financial markets is quite sanguine over the next 3-5 years. The judgment of healthy returns on a tax-adjusted basis from equity markets is based on a medium term view of Indian economy and our understanding of market cycles. The phenomenal growth of the past decade led to cyclical pressures in terms of higher inflation, deterioration in external balances, stretched balance sheets both in the corporate and banking sector etc. and more importantly brought to the fore the structural changes required to be made by the Indian economy to grow for the next decade and beyond. India has made steady progress towards addressing these challenges since the past few years. The correction in international commodity prices provides additional headroom for the country to grow and correct its imbalances.

Given the view, which are the preferred pockets for investment?

We follow bottom-up driven investment approach in all our schemes. In last few months we have seen increased risk taking in certain pockets, risk aversion has reduced drastically which implies we need to be extra cautious while investing.

We believe select opportunities are present in PSU banking, IT space as well as infrastructure space. Modi Government is altering regulation trajectory of the country at a pretty fast pace which may bring additional opportunities to the fore. Good monsoon is expected to drive consumption growth in forthcoming quarters.

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