Mutual Fund Managers Speak On Their Role In Creating A $5-Trillion Economy
Fund managers called for building confidence in tier-II and tier-III cities and removing language barriers.
India’s mutual fund managers said they need to look beyond metros if the industry has to play a key role in realising Prime Minister Narendra Modi’s target of a $5-trillion economy by 2025.
This, along with the lessons learnt from betting on promoter debt last year, was discussed at the 16th Annual Capital Market Conference conducted by Federation of Indian Chamber of Commerce and Industry in Mumbai.
Mutual fund managers have doubled their assets under management over the last five years. The total assets under management stood at Rs 25.54 lakh crore as of June 2019, according to Bloomberg data.
Fund managers called for building confidence in tier-II and tier-III cities and removing language barriers while tapping into newer markets. “We have to look beyond metros and travel to B-towns to reach the masses,” said Jimmy Patel, managing director and chief executive officer at Quantum Mutual Fund. Creating awareness in regional languages and creation of user-friendly avenues similar to e-commerce sites would help the industry to grow faster, he said.
Agreed Radhika Gupta, chief executive officer at Edelweiss Asset Management. Shortage of advisors is another challenge faced by the industry, Gupta said. “You need to make it interesting for young chartered accountants and financial planners to expand into smaller towns and retain investors.” India needs at least 10 lakh advisors at the moment, she said.
Hurdles Faced By Debt Mutual Funds
Debt mutual funds witnessed one of their toughest phases over the past year due to the issues stemming from their aggressive bet on lending to promoter groups. Promoter groups such as Essel and Reliance were offered their holdings as a collateral against their borrowing through non-convertible debentures.
The issues, according to Kotak Mahindra AMC Managing Director Nilesh Shah, have led to learning such as placing a cap on how much a promoter can leverage based on his holdings as now mandated by the Securities and Exchange Board of India. “Everyone becomes wiser in the hindsight. We have learnt our lessons.”
One of the learning was to ensure that on your promoter borrowing, you put a cap on how much he (a promoter) can leverage. An infinitely leveraged promoter is far more risky than a reasonably leveraged promoter. The same is put forward by SEBI through laws.Nilesh Shah, MD, Kotak Mahindra AMC
Call For Relaxation Of Rules, Innovative Products
Fund managers also pressed for easier regulations and innovative products to help India achieve the $5-trillion economy mark. The current threshold of Rs 50-crore net worth is “too steeply high” for new entrants in the industry, Patel said.
The country’s savings, according to Shah, must be diverted into the mutual fund industry from the “bleeding gold imports”. “We have over $1 trillion gold sitting somewhere in the country. Unless we stop further imports and monetise that gold, it’s unlikely that we will have enough capital to create the $5-trillion economy,” he said.
Watch | Kotak Mahindra AMC's Nilesh Shah, L&T Investment Management's Kailash Kulkarni, Edelweiss AMC’s Radhika Gupta, Quantum MF's Jimmy Patel