JM Financial Mutual Fund has been in operation for more than 20 years and is backed by a sponsor with over 40 years of successful track record in the Indian financial-services industry. The risk-management framework that governs the management processes of our equity and debt funds has evolved over time and has enabled us to perform even better in volatile market conditions.
This is evident if you look at the performance, especially over the last three years. We have established a well-defined fund-management framework that depends on collective team strength rather than individual abilities.
We need to work more on improving our overseas distribution and also on strengthening our presence in cities beyond the top 20 cities.
Challenges ahead
A lack of financial literacy is one of the fundamental factors hampering the penetration of financial products in India. Investors need to be made aware of their financial goals; they need to understand the importance of asset allocation and other such basics as these are must in having a balanced approach towards financial planning. Efficient and more cost-effective way of distribution, technology advancement, product simplification, bias towards physical assets like gold and real estate are some of the other challenges that we currently face.
Globally, the investment climate remains hostile. The US economy appears to be on the growth path, while Europe continues to be stabilising, led by Germany. Emerging markets like Brazil and Russia are in serious turmoil. The slowdown in China has had a major impact on global growth. Weak currencies and the crash in the Chinese stocks (by 40 per cent from the peak) has led to heavy FII selling. Weak outlook on commodities will benefit India. The RBI has cut the rates to the extent of 125 bps since policy reversal and this should help push the consumption and capex cycle. The corporate earnings-growth outlook over the next two years is likely to be 15-17 per cent and the Sensex valuation at 14x FY17E is reasonable. Investors with a long-term outlook will benefit with allocations to Indian equities over the next five years.
Competition
We are a ₹12 trillion industry but still the AUM-to-GDP ratio is one of the lowest in comparison to other economies in the world. There is always a room for more AMCs as long as they understand the Indian environment and are committed for the long term to the business.
Retail reach
I believe retail will be key to achieving the overall objective of growth and profitability. Technology will play a pivotal role in improving the retail reach. India's internet penetration is still low but is increasing fast and will be the game-changer in the future. Apart from technological advancements, product and process simplification is also a must for retail. The regulations and demographics will only facilitate retail penetration. We are gearing ourselves up to ride this retail wave.
This article was originally published on November 19, 2015.
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