The Hindu Business Line : `There will be enough scope for hybrid schemes'

QUIETLY, very quietly, the debt market in India has been going through critical changes. It now stands at a very interesting juncture, notes Mr Sandesh Kirkire, head of debt funds at Kotak Mahindra Mutual Fund.

There have been major adjustments in the MF's debt portfolios as well, all of them done with a view to stay in tune with prevailing market conditions. Mr Kirkire shares his views with Business Line.

Excerpts:

What has lately determined the market's behaviour?

Inflation and oil prices have been two very important determinants. For one thing, inflation has been an all-pervasive factor, one that has been closely tracked by every section of the market. Inflation numbers here have been somewhat higher than what some quarters had assumed. International oil prices too have been a key consideration. There has been a slight downward adjustment on the oil front in recent days. The trends that emerge over the next few weeks will be extremely significant.

Elsewhere, there seems to be enough liquidity in the system.

What are the issues that debt fund managers are currently tracking?

Market participants are looking forward to moves that may be made by RBI. The central bank is known to be monitoring the inflation scenario closely and any statement that may be issued by it will be immediately taken into consideration by fund houses such as ours.

The market's grave concerns regarding inflation may not last for long and one has to see how the situation evolves over the medium term.

Fund managers have been active participants in it and are expected to remain so in the days ahead. Many of them had, for instance, upped their cash components recently, which have been scaled down subsequently. Such modifications have happened at Kotak too, done with a view to protect investors' interests. The market, you will appreciate, has been quite uncertain and this has necessitated so many changes.

With returns coming down, what can investors in debt funds expect?

If you have a time horizon of one to three years, you may consider looking at debt funds actively. True, returns have been on the decline in recent times. But I don't think debt funds will really disappoint those who can afford a medium term perspective.

The MF sector, which is evolving quite quickly in this country, has already started offering specific products to suit specific needs of various classes of investors. I feel our clients will be able to choose the funds that meet their requirements in the most optimum manner.

Will the market move more towards hybrid products?

Given what has been witnessed in the past couple of years or so, this has already happened to some extent. Going forward, I think there will be enough scope for hybrid schemes. The so-called MIPs and the way these have come up lately are a good example. Investors are likely to go in for options such as these in a far more serious way.

A section of them may feel the need to combine these with traditional debt products. As things stand, a good number of schemes are already available for investment in the market.

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