No dip in SIP contribution; MF inflows have tapered: Kotak MF

Latha: First up the question is that with this seminal breakdown in the markets and lower net asset value (NAVs) of mutual funds have your fund flows being impacted?

A: These days systematic investment planning (SIPs) contribute to a large chunk of inflows into the industry. Just to give you some figures about Rs 2,700 crore of inflows come in every month through SIP route into the industry. So, that flow remains unchanged. We have not seen any dip in that number at all.

What has probably happened in the last two-two-and-a-half months is the lump sum investments have taken kind of a backseat and mostly they are in wait and watch mode. So, I would say that overall flows have tapered little bit, but they have not turned negative at all.

Sonia: Are you seeing any kind of redemption pressure? Are people sort of redeeming their funds, moving into cash, is that something that you are noticing?

A: That may be happening in patches across the industry but I don’t think that is wide a ranging intent from the investors. Clearly, investors are still looking at buying into market dips. Most of the money is coming in for next three years and five years, so there has been no change in that flow at all.

Latha: Would you say that the market is going into the Budget with very meagre expectations? We are pretty close to the 52 week lows as far as the Nifty is concerned and below 52 week low as far as the Bank Nifty is concerned therefore should we be spared a post Budget carnage?

A: It is very difficult to predict which way the Budget will turn out to be. All eyes are on how the fiscal math will work out. If it is going to be a pro-growth Budget then definitely market will take it positively since the expectations as you already mentioned are quite low. Any positive intent from the government in terms of stimulating growth will be welcome.

The only issue has been they will also have to count for outflows on account of 7th pay commission as well as one rank one pension (OROP). In light of this, how they manage their fiscal accounts, remains to be seen. If they raise taxes or if they increase borrowing the market will not take it very positively. The only way to look at the incremental requirement for funds would be through monetisation of assets. If they are able to do that and if there is a credible roadmap for that then people will be happy about it.

Sonia: I was just going through the top holdings in some of your funds and you have recently increased stake in some of the names like HDFC Bank, Infosys and even in something like Maruti Suzuki. However these are stocks that have started to underperform the markets now. A stock like Maruti has fallen 25 percent this year. Do you think or rather how long would it take for quality to once again start getting rewarded?

A: Clearly, if you look at the market today it has become very narrow. There are very few segments in the market which are showing earnings growth. We continue to remain in pockets where there is visible earnings growth. It could be volatile little bit in the immediate short-term but we believe some of these stocks that you mentioned still will offer higher earnings growth compared to overall market. That is where we believe the money will be made. Incrementally we will be looking at some of these stocks at lower levels if there is volatility to add in to our positions.

Latha: What is your best guess as to sectors where you will lose less principal or making money into 2016 and which would be your avoid areas?

A: Avoid areas are very clear; metals, commodities, telecom these are some of the areas where the pain is going to persist. PSU banks, a negative area for us. In terms of positive areas, it is now going to be very sectoral based and even within sectors there is wide range in terms of dispersion in terms of business performance as well as likely stock performance. So, you need to look at stocks where there is earnings growth visibility and be in those set of stocks.