‘Expect 10-12% rise for Sensex, Nifty in the next 1 year’

CEO, Sundaram Asset Management With the benchmark indices gaining around 26 per cent so far this calendar year (CY17), Sundaram Asset Management Chief Executive SUNILSUBRAMANIAM, tells PuneetWadhwa that fund managers would find it tough to beat the market going ahead, as they would have more challenges to address. He expects a 15-20 per cent growth in the assets under management (AUM) for the industry over the next five years. Edited excerpts: non-banking financial companies (NBFCs), will continue to show a good top line and bottom line growth. From a three-five-year perspective, infrastructure, cement and corporate lenders should do well. Over the next one year, fund managers will start allocating more to these sectors. What’s your view on fund flows into the equity markets? It is difficult to predict FII flows. Money does not always chase growth, it also chases risk. India has been improving on the risk parameters, with the recent Moody’s rating upgrade, a drop in inflation, falling interest rates, etc. What decides FII flows is the relative valuation of other markets as well. India remains a good and attractive destination for FIIs and will get a reasonable share of their money. Domestic flows have picked up and are likely to remain healthy, given a shift to financial assets and lack of investment alternatives. How difficult will it be for your fund managers to generate return/alpha over the next few years? I don’t think the past record of generating around four per cent alpha (largeand mid-caps) and around 8 per cent (small-caps) is sustainable. The economy started to recover and there was a re-rating in terms of price-to-earnings (P/E) for the markets. Going ahead, it will now be the earnings and sectoral growth story that will play out and test the fund managers. There will be a slight reduction in alpha, say around 100-150 basis points (bps), across the board, as there will be more challenges to deliver on.