‘We are at the cusp of a long-term bull market’

By Chandresh Nigam
As we draw the curtains on another eventful year, there is no doubt that we have witnessed an accelerated evolution of the mutual fund industry. The regulator’s continued thrust on investor awareness, business models and policies undergoing changes, renewed pivot on customer experiences, increased focus on use of technology solutions, etc., have been instrumental in changing the mutual fund industry.

In 2021 not only did we witness benchmark indices (Sensex and Nifty) scaling record highs, we also saw retail investors joining the equity cult and supporting markets in spite of heavy outflows from foreign institutions. Let us try to look at some of the major learnings during 2021.

Digitally-enabled customer experience
As governments were forced to adopt a second lockdown, businesses had no option but to jump-start their complete digital metamorphosis. Hitherto existing structures needed to be revamped based on the new needs of the customers and the available technological options to arrive at innovative solutions.  

Today, the industry is gearing up for well-developed digital channels. Most fund houses have dedicated teams that work solely on empowering an experience-based culture for customers. Newer tools have been adopted for the benefit of the distributors and IFAs so that the financial solution matches the user’s needs and expectations.

Passive investment strategies
In the new normal, investors’ attitude towards wealth creation has evolved as well. While actively managed funds will remain significant, we are witnessing growing acceptance of passive investment strategies. While they are a small portion of the mutual fund AUM, features like low cost structure and ease of product understanding will make these a force to be reckoned with.

In fact, on the back of strong demand from investors and increased awareness initiatives by fund houses, several AMCs have launched multiple innovative passive products in India. The emergence of Smart-Beta ETFs and innovative indices that track sectors and top performing companies is a sign of maturity amongst the Indian investors.

Leveraging global growth story
The post-pandemic era has opened up a world of possibilities for investors. With the advancement of technology and digitalisation, an investor has access to not only Indian markets but also global markets. Mutual funds offer an array of products which invest globally in sunrise sectors such as electric vehicles, AI, renewables; opportunities which might not be available on the Indian exchanges.

With the launch of various foreign fund-of-funds, not only is the mutual fund industry re-aligning itself to leverage the power of companies with a global stature but also aiming to benefit from focusing on emerging sector plays which our investors might otherwise not have access to. The journey will now move from
 ‘risk-adjusted returns’ to ‘risk-adjusted (global) returns’.

Outlook for 2022
We are at the cusp of a long-term bull market driven by several tailwinds which we believe should propel India’s growth for the coming decades. Our goal has always been to educate investors on building sustainable long term investment portfolios. One of the key things is the need to remain unfazed during times of market turbulence. In the  last four to five years, as investors have participated in mutual funds in droves, they have increasingly understood the need for such long-term conviction.

The important fact that we are driving home across all our engagements both online and offline is our conviction in the growth potential of the Indian economy and what that means for investors. The response thus far has been positive. It is essential to not only look at the proverbial ‘disruptors’ but also those companies that are enabling this disruption.

There is never a bad time to enter the markets. More so, a correction (even a minor one), can be used to top up and reposition your portfolio to build long-term wealth. Frequent corrections amidst a rising bull market is a healthy sign and more importantly, a wealth creation opportunity. We believe, investing well is one half of the job and staying invested for a long period of time is the other half which investors should give equal weightage to in order to create wealth.

The writer is MD & CEO, Axis AMC