However, this week’s events are just part of the big-picture story that is growth of the Indian economy and more specifically the Indian equities market, he explained.
Krishnamurthy puts this week’s action on Dalal Street in perspective, reaching all the way back to May 17, 2004 when the market’s 800 point fall in 23 minutes coincided with uncertainties in economic policies coming from Delhi. What followed was a “knee-jerk reaction” which pushed the market from 5,000 to 14,000 44 months.
In this interview excerpt, Krishnamurthy explains. to Kartikay Mehrotra, the market’s tendencies to pick extremes and how best to play them in a largely unpredictable, highly volatile environment.
What a week, what a last couple of months. How has the activity in the equities market affected equity-based mutual funds?
Our tracking has been at about .26 per cent, so the activity for us has been extremely beneficial. What we’re trying to do is get those who have paid out on one mutual fund or are trying to pay out on another, to get them some cash benefits. Investors under passive management like to take a little cash home when things go up. We are seeing more inflows, as a there is no fund manager involved here. Those who have been around and have seen their net asset values (NAV) going down might want to see their money for a while, then give it back. Then again, I don’t think anyone has ever been able to call the market right, so it’s tough to say which is right which is wrong, which is gaining more.
Do you believe prospective investors have been alerted? Is the 20k mark like an alarm sounding in the wallet of investors who may have had their back to the market since 8K or 15K? Do you expect retail inflows in equity-based MFs to go up now?
Markets tend to exaggerate either way. In 2008, you saw a market float around 8,000 while GDP was at 5-6 per cent. It was down from 8 per cent, a 2 per cent fall which resulted in 60 per cent erosion in the market, so for two years, they waited As they saw the index of industrial production (IIP) go back up, we all waited for the market to go up, but it didn’t happen immediately. It was unpredictable, it took its time. Then suddenly everyone jumped on and the Sensex went from being a lag indicator to being a lead indicator overnight. But when it does that, it does it dramatically. So once it hits 20,000, everyone feels like there is a great likelihood that it’ll breech records. At 21,000 everyone will be looking to book profits. People should remain cautious; there’s no need to throw money at the market, but there’s a lot of upside. Obviously there will be a correction and people need to understand that too.
Were former investors and prospective investors jumping back on the market as it climbed toward 20k or were there more people on the outside looking in, just watching the numbers rise and rise?
Lots of people watched it which is evident in inflow numbers of most mutual funds. People were very skeptical from 15-18,000. Ironically, the best month for trading in the last few years was January, 2008. Buy-in-large, investors don’t come in when markets are bad, they’re already bad for that reason. A good investor comes in when markets are good, but remain through a bad cycle and makes good money when the market recovers again. In a growth market like ours, there will always be volatility. But you can never say that something good won’t happen. In a growth market, there’s never a bad time to invest, but as I said, there will always be volatility.
In a flat-ish economy, the market will remain volatile with less extremes.
What advice are you giving these days? Is it time to play it safe, is it time to dive in head-first, is time to put your money back under your mattress while anticipating another free-fall?
For the last 10-years, as far as India is concerned, there’s no such thing as the wrong time to invest, there is only the wrong time to get out. Industry is growing at 10-14 per cent. In that kind of economy, will the index stocks do less than that? It’s highly unlikely. Then what’s the downside? In certain periods, there will be a down pressure caused by volatility. But that’s it. The longer you stay invested, the better your chances of reaching your personal benchmarks.
You say there’s never a bad time to invest, but under such volatile conditions, it must be tough to tell how to play the game, especially if you’re not an expert trader. What advice do you have for the novice?
See, traders have a lot of competence and can play the market expertly. They know the risk, they can face debt and can recover Then there are investors taking a long-term call. And unless you are capable of going along for the joy-ride, and gambling like a you’re at a casino or in horse race, you should stick with the index stocks. It’s a global phenomenon, the only guys who makes money is the one who sticks around for a very long time or plays very short-term by trading over a couple days, hours or even minutes. So take a position, one or the other. If you take the short-end, you should play the marketplace; you’re trading, you’re playing and you’re not caring about the companies themselves. If you take a long-term call, then say you’ll be invested for 2-3 years. As i said, the best way to do that for a guy who doesn’t have all the information is to buy an index stock.
Tell me about this Nifty Junior. How many subscription applications did you receive? Who’s applied, what’s the makeup?
We have amount the biggest Nifty junior funds a 54 crores. At our NFO period, we didn’t do a big launch, but we collected something like 8000 applications. It mostly serves as a retail product for retail investors.
Generally, how have things gone since SEBI gave you licensing to launch MFs? As expected? Better?
It was May when we received licensing permission, so it’s three months old now. We’re doing pretty good at 3,250 crores on the 26th of August. In those three months, we’ve overtaken 13 of our competitors. We have a very powerful institution in tact. What we’re trying to do is to see whether we can use our 700 branch network to get applications on the retail side. As a PSU we have all the advantages of people thinking were’ here for the long-term.
Source: http://www.expressindia.com/latest-news/-Market-rally-means-mutual-funds-are-feeling-good-too--but-novices-beware--/688502/
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