Vishal Kapoor, CEO, IDFC AMC says, investors need to spread their investments across asset classes
This was an exceptional year, where the industry reached new heights across many parameters. Prominent amongst them were the growing faith in SIPs, increase in investor allocation towards hybrid funds, AMFI's investor awareness campaign 'mutual funds sahi hai', instant redemption in mutual funds and payments through UPI.
Our fund house focused on few key things such as the launch of our balanced fund and the credit opportunities fund, alignment of our schemes as per the SEBI defined categorisation, spreading financial literacy and reaching out to a wider distribution base to share our thought process around investment and engagement.
Managing return expectations
We have a strong investment framework, and our funds are segregated based on the investment time frame and investor needs. This helps investors understand the scheme profile and come on a common page before selecting a fund for investment. We have also designed tools which can help explain risk-and-return dynamics.
Equity funds by nature carry market risk. Our effort, therefore, has been to moderate investors' return expectation, emphasise the length of stay in the market and stay away from timing the market. For less aggressive and 'susceptible to volatility' type of investors, SIPs remain a good mode of investment. Our initiatives like systematically investing in 'varying intensities' on the basis of market valuation further encourages systematic investments during times of high market valuations.
Rising industry assets
While a growing asset size may not be a challenge in terms of managing funds, the challenge is to manage investors' return expectation, especially first-time investors who may be investing at relatively high valuations. We would like investors to take a holistic approach and allocate their investments across asset classes, remain aware of their risk appetite and have access to the right information and advice.
Growing clout of domestic funds vis-a-vis FIIs
Traditionally, the selling action by FIIs was a regular worry in the market and it would reflect quickly in prices, given their relative size. However, with the domestic flows now surpassing FII flows, this concern has taken a back seat.
Outlook for equity and debt
With valuations at elevated levels and a sub-par quarterly earnings season behind us, the markets will gravitate based on news flows - geo political as well government actions. This could lead to higher volatility.
If the global backdrop continues to be sanguine, the state of the local economy may argue for lower real rates, which is currently the case. Now if CPI remains well-anchored (as seems the expectation now), then this would entail further cuts in the nominal policy rates.