In Conversation With,Chandresh Nigam MD & CEO, Axis AMC

Chandresh Nigam
MD & CEO, Axis AMC

"Brand Campaign For Mutual Funds Has Struck A Chord With Crores of Investors"

What is your outlook on the global markets for CY23 and will the Indian market outperform its international peers?

The year 2022 in hindsight can be seen as the year of market contemplation. Indian markets are likely to end the year almost flat (±5 per cent) barring a possible December move on either end. Globally markets have reassessed a plethora of global risks. We believe the year ahead will act as a litmus test of India’s resilience. Corporate India’s balance sheet is stronger than it has ever been over the past decade as much of the deleveraging cycle has played out. Green shoots in terms of capex and follow-through of earnings have buoyed Indian equity markets to all-time highs.

For rates, we anticipate, markets have already begun pricing in peak levels of policy rates. Policymakers have focused their attention on combating widespread inflation. With recessionary fears, political upheaval is likely to force central bankers to re-evaluate this stance and balance policy back in favour of growth. Asset allocation models have been impacted over the last 18 months as both equity and fixed income world over has been on the downturn. As that correlation potentially normalizes in 2023, opportunities are likely to re-emerge. Volatility has been a lesson for new-age investors post the pandemic, and 2023 is likely to be no different.
 

In your view, what is the reason equity SIP investments have hit record highs recently?

The Indian consumer is famous for its brand association of products across every industry an acronym that defines the product category. In the investing world, SIP is our acronym. The brand campaign for mutual funds has struck a chord with crores of investors who associate mutual fund investments with SIP. The hassle-free nature of the solution and the ease with which it is integrated into the financial payments network makes this a popular medium for investors. This number we anticipate will keep growing and could become the dominant medium for asset gathering in years to come.
 

Can you throw some light on the best way to participate in the equity markets?

Equity markets have gradually become more and more democratised as technology improves the way our market's ecosphere functions. For this, we must credit the regulators and market intermediaries for building a robust yet scalable digital market setup. Today, investors from the remotest parts of India can access the equity markets through direct equity solutions offered by brokers or via financial solutions like insurance providers, portfolio managers and mutual funds. Depending on the type of investors a combination of entry points can be an ideal choice. Investors have chosen MF SIPs as an ideal solution for periodic deployments of funds to equity markets.
 

What is the biggest challenge in beating the markets consistently?

I believe Indian investors are still relatively inexperienced when it comes to time spent in the market. The recent correction and the subsequent recovery have caught investors off guard. Investors by and far have been mature enough to listen to the views of financial planners’ advisors and MF providers on how to approach investing. The FinTech space notably has furthered this cause, reaching out to those previously untouched by our industry.

We conduct an annual study comparing fund returns and investor returns. The crux of this study is to highlight how investors lose out in the long term by taking investment decisions based on myopic and often emotional factors. Patience and truly long-term investment horizons can bridge the gap between the two returns enhancing the overall experience and happiness quotient of investors.
 

What are the future drivers for the mutual fund industry?

Evolution is natural, especially in a dynamic industry like asset management. Mutual funds have seen a significant increase in investor mindshare. I do not foresee this growth reducing any time soon. Active funds have stood the test of time with funds capturing significant growth opportunities over the last 20 years. The industry as a whole has built a very strong track record and will continue to do so in the times to come.

The fixed-income market has also seen a natural acceptance as more and more mature investors have started investing the fixed income products to leverage asset allocation in favour of stable investment portfolios. As the fixed-income market deepens, nuanced investment strategies for income generation can see prospective demand from investors. We are already witnessing an acceptance of these in the private credit markets.

Global markets have also been a new frontier that has been well received. There, specifically thematic strategies that are not available in India could be untapped opportunities. Also, rising interest rates in the developed markets have made fixed income a compelling opportunity. Overseas investments have hit a regulatory hurdle temporarily but can be a great opportunity for investors to take targeted exposure.

Finally, the recently opened commodities market in India is a new investment avenue. With SEBI giving MFs permission to participate in ETCDs (Exchange traded commodity derivatives) MF’s can now look at a whole new asset class. This will most likely lead to a completely new range of products and solutions over the next few years. Globally there are a plethora of strategies both on the multiasset front and standalone commodity-based strategies that have found acceptance by investors.

I am confident, mutual fund AUMs will rise manifold as compared to today’s AUMs. As regulations allow for funds to increase their depth of offerings both in terms of asset classes and investment strategies. Regulations thus far have struck the perfect balance between opening up investment avenues while safeguarding investor interests. Hopefully, this trend continues for the next 20 years and more.