AXIS Asset Management Company, the wholly-owned subsidiary of Axis Bank, recently got the regulator's approval to launch its funds. Axis AMC plans to draw on its strong client base of the bank to build the asset management business, says Axis AMC MD & CEO Rajiv Anand in an interview. Excerpts:
How soon do you plan to launch your funds, and how will Axis AMC distinguish itself and grow in this already crowded market?We have received regulatory approvals for two schemes — Axis Liquid Fund and Axis Treasury Advantage Fund. And these schemes will be launched in the first week of October. Axis Bank has a presence in over 525 Indian towns through 861 branches and has over 75 lakh customers. Our gameplan is to leverage these strengths.
We want to build our business on three strong pillars, i.e., investor-oriented communication, forging long-term relationship and enduring wealth creation as opposed to just short-term opportunistic wealth creation. These guiding principles will ultimately differentiate Axis from the rest.
Is there any scope for further product innovation?
As the Indian investor evolves and our markets develop further, there will be product innovation opportunities. We are, for example, very interested in creating retail debt products, which can deliver superior tax-adjusted returns with low volatility.
Having said that, with current levels of penetration of mutual fund products in India, what we need is more innovation in communicating the benefits of the product and telling retail investors how mutual funds fulfil an investor's needs.
Do you have any plans for inorganic growth? Do you intend to bring in a foreign partner?
We are open to inorganic growth. However, the fit — especially from an investment philosophy perspective, should be right. Needless to say the price has to make sense. Currently, we have no plans to bring in a foreign partner.
What is your view on equity market? Are you comfortable with valuations after the recent run-up?
It is difficult to assess markets in the short term, more so in an environment where asset classes across the world are moving synchronously on low-opportunity cost of funds. We believe that the current low interest rate environment and relatively high growth in the Indian economy justifies current valuations. Going forward, markets should deliver returns in line with the profit growth of Indian companies.
This we believe should be in the vicinity of 15% over the next three years. We believe that corporate profits drive stock prices over the medium and long term and hence, we anticipate similar growth from equities over this period. While stock markets are no longer cheap after the sharp run-up seen in the markets, investors would do well to maintain their targeted equity allocations and benefit from this long-term appreciation opportunity.
What is your view on the interest rate scenario in India?
From a policy perspective, RBI will continue to balance growth and inflationary expectations. RBI will also have to consider expansionary fiscal policy and its impact on long-term rates. Further, global interest rates, specifically in the US, are expected to remain low for an extended period of time.
As far as the gilt curve is concerned, we believe the long-end prices factor in most of the negatives, including inflation at 6% by March 2010, fiscal issues and likelihood of monetary tightening. However, the shorter end may see some upward movement if RBI acts to remove some of the excess liquidity in the system.
Debt schemes are doing well. Do you recommend pure debt schemes or hybrid funds such as MIPs to investors?
Investors must build their portfolios based on risk assessment. What this means is that investors must understand their investment holding period and ability to take losses.
For investors with low-risk appetites, hybrid funds provide a very good option as the fixed income component cushions the volatility of equities while over long periods equities provide significant capital appreciation.
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