The mutual fund industry, which witnessed significant growth in the wake of demonetisation of high-value currency notes in November 2016, is likely to grow faster in this current financial year. The industry’s efforts to reach smaller towns have started to reap fruit. In an interview,A. Balasubramanian , CEO, Aditya Birla Sun Life AMC, said that 2018 looked promising with the recent uptick in the industrial production and the GDP numbers, significant growth seen in passenger car sales and air traffic and in the progress in corporate earnings. Excerpts
2017 was a good year for the mutual fund industry. Will 2018 mirror similar growth in flows and assets under management?
Year 2017 was one of the most remarkable years for the mutual fund industry both in terms of growing the equity asset class, as well as systematic investment plans (SIP) as a mode of investing.
This has not only resulted in an increase in the overall customer folio but has also led to new customer additions for the industry. The government’s bold move of demonetisation also acted as a blessing in disguise for the mutual fund industry, clocking huge inflows.
Having seen this unprecedented flow into mutual funds in 2017, we may probably see the momentum in asset growth continue; however the rate of growth would be marginally lower.
The SIP mode of investing will gain momentum in the coming year too. With the introduction of the Long Term Capital Gains (LTCG) tax, we see a pick up in fixed income-oriented mutual funds and serving the larger needs of the customers in choosing all possible asset classes from the mutual fund bouquet of products over and above equity-oriented schemes.
What will drive the next leg of growth?
With the continued effort by both AMFI [the Association of Mutual Funds in India] and individual AMCs to increase the awareness level through various campaigns such as ‘Mutual Funds Sahi Hai’, we see the number of new customer acquisitions continuously going up and unlocking huge untapped potential. We see the overall mutual fund pie increasing in relation to the bank deposit base; [it] is currently at 18% of the banking industry size.
What are the key contributors to growth for Aditya Birla Sun Life? What are your business targets ?
With the continuous focus on building the equity asset base, we are one of the fastest among the top five AMCs in terms of equity asset growth. Our overall growth was in excess of 84% [over] the previous year base. The other major growth contributor is our monthly SIP book size. We are also constantly focusing on building our customer base with various initiatives around digital.
Going ahead, we [will] continue to keep our focus on market and customer expansion while building our retail asset base in all the asset classes serving the needs of customers such as savings, income, growth or wealth and tax-oriented schemes.
SIPs continue to show growth. Is this sustainable?
SIP has become one of the most preferred modes of investment. Currently, the industry’s monthly SIP book size has reached a billion-dollar size and is clocking new heights every month. This will only further increase given the ease [of use] and the advantages of SIPs.
B-15 (beyond the Top-15) towns have shown steady increase in retail assets under management. What is making this work?
Yes, B-15 markets have shown tremendous growth over the years. These huge inflows of B15 retail assets are due to continued efforts of both investor education events, as well as our distributor fraternity reaching to the nooks and corners of B15 cities and contributing to the retail assets at large.
Given the current stock market scenario and the corrections one has seen, what strategy should a retail investor follow?
Strategy for retail investing should always revolve around goal-based themes of individuals and time horizon. Currently, keeping the recent volatility in mind, investors should not only continue their SIPs but they should also consider increasing their SIP ticket size or multiple SIPs based on their broad goals, whether it is for savings, regular income, wealth creation or for tax-saving solutions.
Such investments should be spread across different equity schemes ranging between large-, multi- and mid-cap funds. While one does lumpsum investment, one should not only invest through equity, but also look at fixed income schemes in order to have the right asset mix between both the asset class.
What’s your view on the economy and markets?
Barring the last three months, due to some volatility in the global space such as rising U.S. interest rates, trade protectionism, oil price volatility [and the like], we experienced a bullish market, with investors receiving handsome returns.
Closer home in India too, the last three months were not a cakewalk for the broad economy, Events such as the PSU bank [fraud controversy], recent bypoll elections, introduction of the LTCG and the like had created temporary volatility waves.
The future, in 2018, looks promising with: the recent uptick in the IIP [index of industrial production] and GDP numbers; significant amount of growth seen in passenger car sales and air traffic; [and] progress in corporate earnings.
Now that two major reforms — demonetisation and GST — have settled, we see a major reflection of a sustainable economy in the coming future.
