Diversified funds attractive to investors: Mata Sec

What retail and HNI investors are doing with mutual funds now? Sameer Kamdar, National Head-Mutual Funds at Mata Securities beleives inspite of there are opportunities for investors in FMP, they are being ignored by retail investors. Despite this FMPs have seen a robust interest. The 1-year FMP gives 9% return post tax versus 6% from bank FDs.

He said open ended funds are much better, and one can exit any time. While returns from close-ended funds are lower in comparison. So investors should go for SIP investment, he advises.

Excerpts from CNBC-TV18's exclusive interview with Sameer Kamdar:

Q: How are you clients approaching equity funds now? Is there any sense of redemptions or has confidence returned and people are slowly buying in?

A: I think they are slightly nervous and waiting for markets to consolidate. But I don’t see any signs of any large scale redemptions, whatever is in the normal course of action is what is been seen. In fact in a lot of cases including HNI, we have been receiving a lot of queries to look at getting into the market at lower levels and there are also people who have not participated in the rally in previous time. So they are also looking to get in. So no signs of redemption small purchases happening.   

Q: Any interest in the NFOs which are open, four-five of them right now?

A: The interest in New Fund Offer (NFO) has been waning now from January and one saw two-three NFOs that crashed and burned in March. I think the response is quite tepid and nothing exciting on the counter so far.

Q: What kind of funds are seeing interest, the large diversified funds, the infrastructure style funds or any of the thematic sector ones?

A: I think the diversified funds are the ones those who have shown good performance in the past, continue to attract a lot of good money and the theme that stands out is the infrastructure funds where a lot of the funds, the DSP T.I.G.E.R (The Infrastructure Growth and Economic Reforms), ICICI, the Tata Infrastructure they have done astoundingly well over the past one-two-three years and they continue to attract a lot of attention.

Q: After the scare of January to March where I imagine lot of the Systematic Investment Plan (SIP) type investors also would have got rattled. Has that mood settled? Is the steady flow of SIP happening?

A: We got a lot of queries from investors who wanted to know whether they should stop doing the SIP and we have to go back to re-educating them. That being the wonderful time for them to add more because that would lower the average cost of their purchase. After doing that I don’t think there is been any panic in that and I think most peoples' SIPs are continuing. I personally feel that there has been a fundamental shift in people’s mindset and they are no longer looking at equity or SIP as just a very short-term story. So most of those investors in SIPs are staying put.

Q: Has there been any greater inclination to look at fixed income kind of mutual funds over the last month or two. Are people looking at Fixed Maturity Plans (FMP) or even Fixed Deposits (FD)? What’s the sense you get?

A: In fact that is been the surprise package so far, because fixed income use to largely remain the domain of institutional investors, but we have seen of late that there is a robust interest in Fixed Maturity Plans and there are very distinct advantages of Fixed Maturity Plan investments. First, it's virtually tax-free - if one is on a 365 day plus FMP and the returns are very high. So in April we saw FMPs which were more than 9.5% for one year.

So, on an adjusted basis for one year index for inflation, I think 9% post tax in FMP versus 6.5% in bank FD then FMP is a winner. So a lot of HNIs and retail interest now and most of the funds have reduced the FMP minimum application size to Rs 5,000 or even in some cases little lower. So there has been very strong demand from the retail and HNI segment for FMP. That’s been the surprise package.  

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