The Indian mutual fund industry is transforming, in terms of regulation, primarily for the benefit of the investor, and with the objective of expanding participation. In 2014, funds will have the responsibility of finding opportunities in the current market as well as improving retail participation.
The equity market
Equity markets scaled new peaks in 2013, with the Sensex crossing 21,000. However, within the market, there is disparity between sectors. For instance, FMCG and health care sectors were up by 200% and 160%, respectively, while capital goods was down by 40%. This skew, due to the dominance of a few sectors and, within these, a few stocks, has resulted in investors failing to earn substantially from equity in the past few years.
However, this concentrated market movement has also thrown up opportunities to invest in good stocks at attractive valuations. Once the aversion to risk wanes and a broad market rally ensues, many of these calls will be profitable for investors. Markets have been improving fundamentally. Receding concerns about global recession, subdued oil prices and domestic reforms augur well for equity markets.
Sectors to watch
We expect information technology, pharmaceuticals, auto ancillary and engineering & capital goods sectors to do well. Companies in these sectors have benefitted from the depreciation of the rupee. With major economies on the path to recovery, companies involved in exports will benefit. Further, increasingly, local production is being preferred to costly imports.
Increasing retail participation
Improving financial literacy is imperative for the growth of the mutual fund industry. While investors are familiar with funds in the metros, people in smaller towns and cities still have inhibitions about investing.
So, AMFI (the Association of Mutual Fund Industry) has launched the District Adoption Programme, or DAP, wherein a mutual fund company will adopt certain districts to improve financial awareness. This will help investors understand the potential of funds and think beyond fixed deposits or national saving certificates.
CEO, Reliance AMC & Chairman, AMFI