Financial Daily from THE HINDU group of publications
Monday, Oct 21, 2002
`Realistic expectations will help' Mr Arindam Ghosh, Head of Sales, First India MF
FIRST India Mutual Fund, which till a few months ago had just one fund (a tax-saving scheme), has recently wrapped up an expansion phase by extending its product portfolio and refurbishing its marketing set-up. "At the end of the day, a mutual fund should be in a position to add critical value to one's investments," Mr Arindam Ghosh, Head of Sales, tells Business Line in an interview.
Excerpts from the interview.
There's a feeling that equities are not for everybody....
I don't subscribe to the theory that equities are not for all and sundry. They are for everybody, the only critical factor being the degree of allocation. The percentage may vary depending on an investor's risk-taking profile, investment horizon and the need to diversify.
With the current interest rates being where they are for all you know, rates are probably heading south equity is recommended, of course to a much scaled-down extent, even to an individual who is retiring in two years' time and is healthy enough to live for, say, 10 or 15 years more. The key is to define your `time horizon'. If you are clear on that front and have realistic expectations, you should be successful.
Having said that, let me add that equity is not for the faint-hearted. For the disciplined investor, however, it will deliver more than other investments over a longer period.
So, can diversified equity funds really make a difference?
Such funds, by definition, water down risks by investing in a wider spectrum of sectors. A sector fund, on the other hand, may catch everybody's fancy when the going is good in its chosen area. But God help you if you get caught on the wrong side of the cycle...
A diversified vehicle helps you iron out these cycles across sectors and minimise risk in the process. One should, however, be prepared to settle for lower returns as compared to a sector fund. In the case of the latter, returns may actually be spectacular if the sector is doing well and one has not entered at the tail-end of the cycle.
What is your own growth fund doing in terms of handling risk?
First India Growth Fund has pegged sectoral allocations at a maximum 15-20 per cent. As of September 30, our allocations have been more in pharma and IT 17 per cent. In banking, this is at six per cent, and in the others (covering electrical equipments, chemicals, metals, mining, oil & gas etc.) at around five per cent. There have been no major changes in the fund's portfolio in recent times.
What is First India's take on debt at the moment?
The market is witnessing a strong rally in the government bond prices in the secondary market. Bonds are also moving up, and the seeming reluctance of RBI to intervene at these yields is significant.
We may see a further fuelling of the bond rally on the back of the central bank's stance.
The market is keenly anticipating a cut in the benchmark bank rate in the mid-term review in end-October. Overall, credit offtake is low and liquidity continues to remain comfortable.
How are your income products poised to meet changes that are foreseen?
As for the bond to g-sec mix, you will see that we have followed a conservative policy in the past.
Our fund managers are trying to take advantage of the rally in bond prices and this has an impact on returns.
We would not like to provide unrealistic return projections. Serious, long-term investors should understand the risk-return profile of a bond fund and be content with the idea of realistic returns.
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