‘Some parts of market little overvalued, rest is at very good valuation’

SWARUP ANAND MOHANTY, Vice chairman& ceo, mi rae asset Investment Managers, the Indian arm of mi rae asset of south korea, says some parts( of the stock market)maybe a little over valued but enough companies are available at great prices for a fund manager to build a portfolio. in an interview to HITESH VYAS and GEORGE MATHEW, Mohanty, who manages assets worth Rs 1.61 lakh crore, says, “there is a shift (of money) to financial assets. but not at the cost of the banks. Maybe people have realised that this (financial asset) is a good area for investing.”

New players are coming into the mutual fund space. How do you see competition?

Gone are those days when the brand was really overpowering. If you look at the early days of mutual funds, those were the days when parents’ brand meant everything. But now it has become a business of the product. If you are a big name, you start with a credential, but then the product or the track record has to fall into place. some large players are finding India to be good but simultaneouslythere are players who are leaving also, which is very sad. India is such an amazing country for the future and wealth creation in India is really happening at a very rapid pace. This is the market. I don’t understand why people leave. It is very easy to leave India and trust me, re-entering( in India) will not be as easy as it was.

How do you see consolidation in the mutual fund industry?

Consolidation is a continuous process. While some parts will consolidate, I think the wealth growth is such that it is encouraging a lot of Indian players now to also start their own asset management company. We have seen a lot of Indian players seeking licences. I also feel a lot of global players are coming in but with a better and a different approach. They are coming in as a partner or are coming in as a small owner of a large name and gradually increasing their stake.

A lot of investors are now beginning to start looking at mutual funds. Some are even pulling out their deposits from banks to invest in mutual funds. Do you think this phenomenon will continue?

I don’t agree that bank deposits are coming to us (mutual funds) yet. data will show you that against one sip( systematic investment plan ), there are10fds( fixed deposits). That is not happening, and with the change in taxation, the money has only grown with the bank. But what is happening, and it started probably in demo net is at ion, and got hastened during Covid, is that there is a shift to financial assets. But not at the cost of the banks. Maybe people have realised that this (financial asset) is a good area for investing and also because financial literacy has grown.

What are the reasons for a big jump in the number of folios and monthly SIPS?

We just have 4.3 cr ore folios as against 9 crore demat accounts. India is probably the only country where mutual fund folios are less than demat accounts. So, yes, to answer your question, this (number of folios) used to be just 2.3 cr ore before c ovid, but post-c ovid, in four or five years, we have addedmorethantwocrore.so,finally, there is a change but we have a lot of catching up to do.

So, people are slowly becoming more of investors than savers?

Yes, we are beginning to see that transition because every month we are seeing the SIP numbers consistently growing. So, today if you say Rs 19,000 crore of fresh SIPS per month, it is a sizable amount. You can start saying that the retail investors are beginning to take this (SIP) route to approach the capital market, which is a good way.

What is your assessment of India’s growth in FY25? What would be the drivers of growth?

If you go back to pre-covid, India was mostly a service sectorled economy and post Covid we have seen broadening of the economy. We are seeing some distinct green shoots of manufacturing finally happening. Production Linked Incentive (PLI) schemes have definitely led to the groundwork for manufacturing which is probably the biggest welcome change for India.

If you look at the pre-covid time, the banking sector, which constitutes 37 percent of nifty 50, was plagued with np as( non-performingassets) and low credit off take. Covid kind of cleaned up the balance sheets of most of the banks and today they stand as a far stronger unit than earlier. Nobody has the payment systems like India. The government push towards infrastructure will start yielding results in sometime. All this will begin to play out. The cave at can be we can do a lot more in labour and land reforms. And the icing on the cake will always remain the demography. We have to address two very important points. First is employment. If the unemployment grows then with our demography there could be an impact. The second part, from a personal perspective, is that more should be allocated to healthcare in the Budget because malnutrition is also growing.

How do you look at capital market? Is it overvalued or adequately valued?

It is overvalued in pockets. the market has run up in small pockets. If you look at the last two to three years in particular, you would have seen a good rally in public sector units(psu ), defence, capital goods and some heavy metals have done well. Maybe some part of the market you can say is overvalued. Also, I think there has been a significant run up in smaller companies. If you take out that part which addresses the liquidity issues of the market and these four sectors which have run up dramatically, we feel there st of the market is at a very good valuation… especially some of the larger companies that are looking very good nowadays. It is a fund one managers’ market.

SEBI has recently mentioned about the build-up of froth in certain segments of the market. How bad is the situation?

I think the (SEBI’S) interventionwas timely. when you look at it from a regulatory framework perspective, regulators are always sitting for investors and not for any AMC. When you see 40 per cent of inflows going towards mid and smaller companies, that’s where there was some amount of concern. It is true that smaller companies have liquidity issues. If you start owning them in large quantities and then try to sell them, they will not get sold. That froth is valid. If you take out that froth, there are enough other companies which are available at good prices. What it will do now is that many will start correcting that.