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Nilanjan Dey

KOLKATA, Dec. 2

MR N.K. Sharma took over as CEO of IL&FS Mutual Fund earlier this year, barely days before he spoke to Business Line for the first time. This time, however, he sounded quite despondent when asked about the immediate future of the stock market. "No one knows for sure as to when equities will start looking up," he said.

Excerpts from the interview.

Is there a case for equity investments now?

No, if you are only interested in taking speculative bets on equity funds. As the popular saying goes, timing the markets is a very dangerous game. But the answer would be a thumping `yes' if you are willing to stay invested for a decent length of time. Of course, your allocation to equities must be done in a scientific manner.

Remember, the market is aware of the fact that the current valuations are indeed low. The use of analytical tools also favours an exposure to stocks. However, do not expect miracles to happen quickly. If the lay investor wants to make money overnight, equity funds may not be the right place for him.

Traditionally money is not moving towards equity yet...

That's right. For decades, bank deposits have been growing in India. The situation is even more acute at the moment, now that banks do not have enough credit offtake to contend with.

Ordinary individuals still go in for fixed deposits in a major way, the comparative lack of liquidity notwithstanding.

Interestingly, this is an area where funds can make a mark. The industry only needs to be a bit more non-conformist in order to tap traditional resources; it must find ways to gather assets from far-away markets.

A greater challenge, of course, is to show performance. At the end of it all, investors should come to us on their own.

Let me add that bank deposits, least of all deposits that have been put in by small investors, should not move towards equities in an irrational manner. We do not want a situation where such deposits head straight for risky propositions like tech funds.

What is your experience with short-term debt schemes?

Not too long ago everybody was lapping up these schemes, which have come to be known by their generic name, STPs. The STP forms part of most mutual funds' product offerings. It's a medium derived from pure necessity, and IL&FS MF too sees it that way.

We don't encourage investors who try to use STPs like liquid funds. The two have different purposes and should be seen in separate contexts. The fund would rather have longer-term money invested in more basic income schemes.

Given the present nature of the industry, where does IL&FS MF fit in?

We are still a mid-sized AMC and our recent efforts have been all directed to enlarging the asset base. At the moment, we manage around Rs 1,200 crore through a number of funds, mostly on the debt side. There are no immediate plans to increase this number.

IL&FS MF has a strong institutional parent. In future, we will try to cater to more categories of investors and satisfy their diverse risk appetite. A fund that does that well will be accepted by all quarters.

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