Mumbai: India’s fund industry, forced to hibernate for a better part of the past year, are now back in action as a sharp surge in domestic shares revives hopes for a pick-up in flows into profitable equity assets.
Money managers are enthused by an improving investment climate globally that has helped Indian shares rise nearly 50% from their 2009 lows and hope moderating gains from debt and guaranteed returns products will lure investors to equities.
“There is a general belief that maybe the worst is over and sentiments are improving,” Sandeep Dasgupta, chief executive of Bharti AXA Investment Managers, said.
“I think people are revisiting their business model,” he said, adding money had started to trickle back into funds and some fund houses are now realising “that time has come for us to once again get into a more active role of launching funds.”
The revival comes on the backdrop of a tough 2008-09 fiscal for the Indian mutual fund industry which saw assets shrink by nearly a fifth to Rs4.2 trillion in the year to March. More ominously, profitable equity assets shrunk by more than a third.
But the clouds of gloom are slowly lifting, helped by revival of foreign flows and an emerging consensus that the Indian economy and corporate earnings might be close to the bottom.
The domestic mutual fund units of Japan’s Shinsei and India’s Reliance Capital on Tuesday sought the market regulator’s nod to launch equity funds.
BlackRock’s Indian fund arm and Canara Robeco Asset Management, a venture between Canara Bank and Robeco, part of Rabobank Group, also filed equity fund offer documents in April. There were no such applications in March.
Edelweiss Asset Management and ICICI Prudential Asset Management, India’s third-biggest money manager, have launched equity funds in the last one month, among only four new actively managed diversified stock funds on offer so far this year.
German’s Allianz with Bajaj Finserv, and IDBI Bank in April said they would enter the industry, while Singapore’s iFAST with Deutsche Bank’s asset management arm launched a funds distribution platform.
“There is a sudden change in outlook and hence the mutual fund activity has picked up,” Chintamani Dagade, a senior research analyst with Morningstar India, said.
“The significant rally in March-April has definitely changed the investor appetite to equities,” he added.
Indian shares rose more than 17 percent in April, its best monthly gain in 10 years, as a wave of investor confidence swept across the world and foreign funds pumped in more than $1.4 billion in 1 April- 27 April, their biggest inflow since October 2007.
The rally was also powered by expectations India’s economy would pick up later this year. Cement sales have grown at near double-digit rates since November, consumer goods sales are up, while auto demand has firmed after a disastrous December-quarter.
Dasgupta of Bharti AXA said the March quarter results were not as bad as many expected and the economy, which grew at less than 7% in the 2008-09 fiscal year from 9% or more in the previous three years, was showing some signs of stability.
“There is certainly a case of restart in mutual fund activity,” Dagade of Morningstar said.