After several months of outflows from equity schemes, the month of December 2010 witnessed positive inflows. Mutual funds are seen acting as a partial counterbalance to massive FII selling during the year. In an interview with Chirag Madia, MD and country head, Fidelity Investment Managers, Ashu Suyash, says mutual fund investors are back to investing into equity market with the market correcting and being led by strong distribution push.
After months of redemption pressures, December saw a reversal of trend with inflows being witnessed into the equity schemes?
Before December, not only equity funds but also IPOs had not received major investor response. Investors have not yet forgotten the 2008 bear market which is making them wary of investments. And as it happens always, it took a while to return to markets. Whenever investors are sitting on the fence, every market dip is looked as a buying opportunity and this is what happened in December ’10.
Besides, several distributors has also started selling mutual funds once again which is impacting inflows positively. I think the first quarter of the new year might witness inflows into the equity schemes.
We have seen a correction in the equity markets, how do you think markets are likely to shape up in the months to come?
This year has started on a volatile note. However, we strongly believe that fundamental growth drivers are intact. We have seen lot of concerns arise out of inflation and political uncertainty. Until these issues are dealt with, volatility will continue to remain in the market. Investors are advised to be cautious at this juncture.
What do you expect from RBI?s monetary policy scheduled next week ?
I think it is very difficult to predict what will come out of the policy meet. In the past they had taken some strong measures to control inflation.
How will higher inflation and liquidity challenges impact equity markets?
Liquidity challenges are on account of specific events that have taken place, earlier we had huge supply and now we are facing a liquidity crunch. It is typical for a high growth economy like that of India to witness lot of foreign funds flowing into its equity markets. And since it is prudent to not let the rupee appreciate too much (so that exports are not affected), some of the flows will have to be sterilised. On the other hand, the credit growth also hasn’t been very strong, so one can’t say tight liquidity is demand-led, rather its more on account of tight balancing act.
