“There is value for the patient investors”

Over the last four years, the investment engine in India has slowed down owing to some domestic and global factors, but there is money to be made in long term, believes Ved Prakash Chaturvedi, CEO – Capital Markets and Investment Management, L&T Finance. “For an exciting market like India, it is difficult to say equity has lost its charm,” he said in an interview with Ritu Kant Ojha.

Excerpts:

The investors are losing patience with equity. Do you agree equity has gradually lost its charm over last three years?

The Indian equities market is being influenced by several factors — concerns about Eurozone, domestic inflation, interest rate and the rupee situation and a close watch of foreign investors on growth of our economy and earnings growth of various companies. In the near term it is expected that gloomy sentiment in business and investment and some headwinds from overseas markets and news flow may reflect in the market movement. However, the general belief now is that the worst period of our equity market is behind us and if some positive things fall in place, market sentiment may improve significantly. Thus, it is difficult to say that equity investing has lost its charm. Systematic, disciplined and patient investing in equity funds would create wealth in the long term.

Investors have not made any serious money over the last few years. Why should they continue investing in mutual funds?

Mutual funds offer a range of risk-return investment options in equity/ hybrid/ fixed-income securities. Investment in hybrid and fixed income funds have done well over the last five years. Owing to a combination of local and global factors equity funds have not performed. Medium term equity fund performance depends on performance of the economy and that of individual companies. But the engines of consumption, global business opportunities and financial intermediation are continuing to drive growth in their respective sectors. My sense is that the Indian economy will continue to grow at a rate significantly above that of other comparable economies. This will create medium term value for patient systematic investors.

There are 44 fund houses and 4,400 schemes. Do you agree that there is scope of merger of schemes, both in debt and equity mutual funds?

As any industry evolves, new entrants come in and launch a range of products to service their target investors. Some succeed in meeting investors expectations, others don’t and this has been the trend in the mutual fund industry as well. Over a period of time, the products in any industry get rationalised and the unsuccessful products fade away. In our view this is already happening in our industry. The good news is the meritocratic nature of competition and product selection by distributors and investors. This leads to natural selection and effective consolidation of products.

Do you agree there are not enough options available as far as investing in equity is concerned? Why isn’t there have been product innovation in India?

I feel that significant innovation has happened in India in the stock markets and mutual funds with evolving world class backbone for facilitating trades in our markets and similarly almost all instruments in the cash and forward markets are available here. Equity mutual funds offer a range of options namely, large-cap/ mid-cap/ hybrid/ thematic/ price-earning based etc. For the maturity stage of our market appropriate innovation has taken place. However, certain new products in the area of REITs, ETFs and hedge funds etc. will become popular in India in the future.

Source: http://www.indianexpress.com/news/there-is-value-for-the-patient-investors/971856/0