Parallel economy to become mainstream

Anuradha Rao, Managing Director and Chief Executive Officer of SBI Mutual Fund, has a wealth of experience in handling a retail portfolio from her tenure at SBI, the country’s largest lender. Her insights into retail investor behaviour have been handy for the mutual fund manager at a time when investors are grappling with the impact of demonetisation. Ms.Rao, in an interview, opines that demonetisation will, in the long run, have a positive impact on retail investors.

What is your view on the recent government move to demonetise the Rs.500 and Rs.1,000 notes? How would it impact the economy in the short-term and medium- to long-term?

I believe this is a big positive for savings being channelised into investments, an opportunity to work towards a cashless economy with the use of digital mode of banking.

The parallel economy will merge into the mainstream and this again will help in growth and build a more efficient economy.

Though there may be some short-term pain, the positive impact demonetisation would have on the entire economy will be immense.

Banks are expected to receive deposits of about Rs.10 trillion due to demonetisation. There are expectations that MF industry would garner about 10 percent of this. What is SBI MF doing to get a share of this pie?

We are fortunate to have the SBI parentage and at a time when the maximum deposits will come into SBI, we are confident we would be able to get a healthy share of allocations. At SBI MF we are positioning our funds in the liquid / cash category as an alternative to bank savings.

Demonetisation has brought in new account holders into the banking system and, in turn, a large number of first time tax payers. ELSS (equity linked saving schemes) funds could be a good option for them to save on their taxes and at the same time invest to create wealth through equity.

We are ensuring all our digital assets like our investor app, SBI Savings Fund app are effectively used so that we are able to reach out better and make convenient investing possible for potential investors.

After demonetisation, it is expected that there would be a huge surge in the number of first-time tax payers. Considering that most of these depositors are new to the investment world, what is your advice to them?

As mentioned, most of the depositors would be getting introduced to basic savings bank accounts and for the first time, actually realise and experience its inherent advantage. They would also recognise the big difference of money lying idle at home and how, just by depositing it in a bank, they can get returns. With this, they would also become first time tax payers.

ELSS funds can help them in not only tax savings but also in wealth creation. The SBI Magnum Tax Gain scheme incidentally is one of the oldest ELSS schemes in the industry. First time tax payers would do well to plan their taxes with ELSS mutual funds so that their liabilities get reduced.

Mutual Fund industry AUM (assets under management) which currently stands at Rs.16.5 trillion is expected to double over the next three years. How would SBIMF grow?

SBI MF has outperformed industry growth in the last few years.

We have a great team and our focussed efforts should ensure that this outperformance continues. The MF industry has indeed come a long way and has slowly but surely made itself popular and relevant for large and small investors alike. Changes in regulation will continue to be the critical factor which will bring unique challenges for the industry. Increase in awareness of mutual funds, participation in these MF avenues beyond the metros and the use of technology to create better efficiencies in products and services will be key drivers going forward.

Following recent developments like Mr. Donald

Trump’s victory in the U.S Presidential elections and demonetisation, the Indian equities markets have become more volatile. What is your advice to the retail investors?

Volatility is a part and parcel of capital markets. Yes, these two events, particularly demonetisation, have made markets volatile but retail investors should use this opportunity to participate in the equity markets.

At the moment, markets, I feel, are fairly valued. Equity mutual funds are a great way to participate in equities. Professional fund managers, with their expertise, can handle volatility efficiently. Also, one should look at debt mutual funds which are an attractive proposition in a falling interest rates scenario like we are in today. Those with existing SIPs (systematic investment plans) should continue and use facilities like top-up SIPs to increase their allocations during these times. The principle, as always, is to stay invested for a long period of time.

Indians have great affinity towards traditional investments like fixed deposits, gold and real estate and low awareness about the long-term benefits of equity investments. What could change this?

It is already changing. The whole economy, including financial products, is in a resetting phase. Mutual funds have seen growth in new folios and SIP registrations. Gold ETFs and gold funds are gaining popularity over physical gold and investors are evaluating liquid/FMP mutual funds over traditional FDs due to their higher returns and tax efficiency.

Due to sustained investor awareness, efforts taken by mutual fund houses, AMFI and SEBI, there is growing retail participation. Concepts like long-term investing and tax efficiency offered by MFs are now better understood by a majority of potential investors and this will make them move out of traditional investment options and opt for mutual funds. Financial advisers are moving to solution-based selling to their clients and here the role of equity becomes very important. All of this augurs well for equity investing.

Increasingly, both investors and mutual fund houses are going digital. What are the digital initiatives taken by SBI MF?

The world is becoming digital and SBIMF is taking big strides in providing digital solutions to investors and partners. Our InvesTap app provides our investors the convenience to manage their investments on the go. Our SBI Savings Fund app is the first fund-specific app in the industry which can be used by investors to park their idle money at just click of a button. The SBIMF Partner app is helping our partners take proper control of their business and grow it further.

We have introduced our new website with focus on customer engagement. We will also be introducing many more digital initiatives which will enhance customer experience.

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