HSBC Mutual Fund chief recommends these 4 MF categories to first-time equity investors

Kailash Kulkarni

From living an insipid existence over many years, HSBC India mutual fund is back in the limelight. After its acquisition of L&T Mutual Fund, the newly-rejuvenated fund house aims to grow and wants to be counted. Its chief executive officer Kailash Kulkarni told Moneycontrol that he and his team wants to see HSBC AMC as among the 10 largest mutual fund houses in India.

Kulkarni’s zeal about India and Indian markets echoes HSBC’s global thinking that India is a key market. Its recent re-launch of private banking- a high-profile business segment of the bank that caters to wealthy clients- is a reflection of what Kulkarni says is bank’s commitment towards India. In an interview to Moneycontrol, Kulkarni shared his vision of HSBC India Mutual Fund and also where investors should invest, going forward.

Edited excerpts:

It will soon be close to a year since HSBC India AMC acquired L&T AMC. Has the merger been completed and schemes and fund managers settled down in the new entity?

The integration has been successfully completed into one strong entity that enables us to expand in terms of scale and client outreach as well as grow our distribution network to capture opportunities in the growing asset management market in India. The combined entity, HSBC Mutual Fund, is now home to 430 colleagues with a footprint across around 60 cities.

Our investment strategy continues to have the same discipline, rigour, and ethos in all our funds and our investors benefit from the combined experience and expertise of our fund management and robust research team.

Also Read: How to File Income Tax Returns Before 31 July? A Complete Guide

HSBC Mutual Fund offers comprehensive and tailored solutions with over 40 open-ended funds including equity funds, debt funds, hybrid funds, index funds and fund of funds.

HSBC appears to be strengthening its presence in India. After it acquired L&T AMC, it has also re-launched its private banking division. Is this deliberate?

India is key to our global growth strategy. It is one of the fastest growing economies globally and we are committed to invest and grow our overall business in India. In asset management, the acquisition brings enhanced capabilities and ability to better serve the needs of the investors. The launch of Global Private Banking in India also expands our wealth management capabilities here. We are on track with our strategy and firing on all cylinders in India.

Is HSBC bullish on India?

We, at HSBC, believe India’s time is now. India is set to become third-largest economy in this decade, making it one of the biggest opportunities for growth, at a macro level and particularly, for wealth management. Long-term trends such as demographic dividend, digitisation, high internet penetration, domestic support and financialisation of savings are favourable for wealth creation and preservation.

The opportunity to invest in this high growth market is a very exciting opportunity. Particularly in India, HSBC is investing, building capabilities, products, platforms and teams. Robust growth in manufacturing, business-friendly reforms, infrastructural development and political stability make the country the most prominent emerging market to invest in for investors. An exposure to unique and future relevant themes can provide a much-needed inflation buffer.

There are close to 45 fund houses in India. Small, niche firms are setting up with differentiated strategies. Some are going big on passive funds, while some others are going the old, tried & tested supermarket way of having a variety of mutual fund schemes on their shelves. Competition is heating up.

Also Read: How to pay income tax using the IT portal

Is HSBC India AMC, in its new avataar, prepared to take on competition?

Our ambition is to become a leading player in the Indian mutual fund industry. We are taking a multi-pronged approach to meet our ambition. First, we have enhanced our geographical coverage. We have 63 branches across the country to service distributors and investors, in addition to leveraging the Group's strong relationship base across corporates, retail and high net-worth individuals.

Also read: Where should you invest now? Check out MC30; Moneycontrol's curated list of investment-worthy mutual fund schemes

Second, we have been expanding our product offerings. In the first half of 2023, we have launched two new fund offering, HSBC Multicap Fund and HSBC CRISIL IBX Gilt June 2027 Index Fund, tailored to investors’ needs. We are in the process of offering a few more attractive products in the second half of 2023 as well. We are also leveraging global expertise to offer overseas Fund of Funds (FoF), focusing on ESG (Environment, Social & Governance) & other responsible investments.

Last, we are exploring alternative business lines such as launching Exchange Traded Funds (ETFs) and Alternative Investment Funds (AIF) to meet the needs of professional investors, launching quant-based strategies and offering offshore advisory for foreign investors.

What are the main opportunities and challenges in front of the Rs 40 trillion Indian mutual fund industry (and specifically HSBC India AMC) from the industry’s journey of Rs 40 trillion to Rs 100 trillion?

The mutual fund space is changing for the better for all stakeholders with investors at the top of the beneficiary pyramid. Evolving regulations, increasing industry participants, high quality expansion of product suites and the rise of digital distribution channels present a unique opportunity for fueling the growth of the industry. These factors will culminate into a robust mutual fund investing ecosystem with more investors and more informed investments.

Despite a healthy compound annual growth rate in AUM over the past five years, the MF industry in India remains under-penetrated compared to global averages. I believe retail participation should continue to increase in the future as we will see more awareness. We believe that the mutual fund industry would soon have 10 crore unique investors from the current 3.7 crore in the next few years.

Will HSBC India AMC become a substantial part of its global AMC operations? What would your roadmap be to reach that milestone?

Our ambition is to soon become one of the top 10 asset management companies in India and then move to become one of the leaders in the industry in the future. Given the size and scale that the asset management business in India provides, we would be a reasonable contributor to the global AMC operations.

Which sectors are HSBC India AMC fund managers most bullish on in these markets?

We remain positively biased towards domestic cyclicals. We hold a more robust medium-term growth outlook with the government’s focus on infrastructure and the support to manufacturing. The growing Indian middle class and the fact that Indians are upgrading their lifestyle means domestic consumption will play a significant upside as our GDP moves to $5 trillion.

Sensex over 60,000 and Nifty near 20,000 levels. Is this a good time for investors to invest? Or time to go slow on equities?

Having spent so many years in this industry and with significant historical data points to rely on, I would tell all our investors that 'markets break a barrier only to reach a new high at some point”.

Equity as an asset class is volatile; it will have ups and downs. We have seen in the past that the market may fall from the highs, but it is very difficult to determine beforehand whether the fall is a retracement, i.e. minor pullback from high level or a deep correction.

Furthermore, historical data shows that whether the pullback is short term or bearish, the market has always recovered and hit new highs. Therefore, it is in the interest of long-term investors to remain invested.

Focus should be on asset allocation. In high market, the asset allocation gets skewed towards equity. You should rebalance your asset allocation by investing in fixed income. Continue your Systematic Investment Plans (SIP) as investing through this method makes market timing irrelevant giving you the benefit of rupee cost averaging.

If I have Rs 10 lakh to invest right now, where should I invest?

Assuming, I have done my asset allocation and that is already in place. I know asset allocation is an individual thing, but give us a broad direction about assets and opportunities.

If the goal is to stay invested for a long period of time, I would suggest allocating major part of the corpus in equity-based investments. If your investment horizon is a shorter duration, you may want to look at fixed income plans. Conservative or first-time investors should opt for equity savings funds, dynamic funds, balanced funds or index-based investing, as these funds give relatively more efficient returns on the basis of risk-return.