It's been over a year since Invesco (having taken over complete charge of operations from Religare in April 2016) began piloting its India operations as an individual entity and the journey thus far has been fulfilling. With the macroeconomic parameters appearing to be in place, India today is in a sweet spot.
Mutual funds are increasingly emerging as a preferred choice of investors, resulting in a brisk growth for the industry. Our business has been growing at around 24 per cent in AUM as a whole across the three business lines - mutual funds, PMS and offshore advisory - over the last one year.
Managing return expectations
We believe in making investors aware of the various aspects of the markets rather than just concentrate on returns. We provide advice through our investor-centric communicative pieces that investors need to plan their investment priorities and goals based on their risk profile. Our fund managers voice their market views through print, television and social platforms on a regular basis. At the ground level, we also engage with financial advisors and distributors and share our views on the markets that help set expectations right.
Risk controls
Our risk controls are largely woven into the due diligence conducted on the business models of companies and their longevity. Moreover, every fund is run true to mandate and additional risk-mitigation factors with respect to stock/sector, liquidity and market-cap exposures are guided by individual product-specific mandates.
Rising industry assets
Typically, sub-optimal portfolio returns and moving up the liquidity risk curve are the two key threats in a scenario of rising assets. At Invesco, we have enough fund capacity to absorb liquidity and yet maintain reasonable returns.
Growing clout of domestic funds vis-a-vis FIIs
Equity flows into emerging markets tend to move through different stages of their life cycle. Foreign liquidity usually tends to dominate in the early years of an economy's evolution, but thereafter, rising prosperity and higher savings rate lead to an upturn in domestic liquidity. India is at the second stage of this cycle. This also implies lesser volatility and valuation-positive for Indian markets. As the market attains a certain level of maturity, it tends to be indifferent to the source of flows that drive it.
Outlook for equity and debt
Markets will have to contend with short-term ebbs and flows of valuation cycles that may induce corrections along the way. The current macro mix of political stability, low interest and inflation rates, stable currency and comforting twin deficits will likely activate the much awaited growth cycle over the next two to three years.
We are positive on the fixed income market and expect further rate easing over the next two to three quarters. The market is expected to benefit from easy liquidity, declining rates and a stable rupee.
This article was originally published on December 12, 2017.
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