Experts bullish on future of MFs in India

Mark Tucker, Group CEO, Prudential, feels investors should invest with a medium- to long-term horizon. "They should refrain from investing in the short-term especially when there is tremendous volatility in the market. Equities as an asset class has always been the best performing asset class over a reasonable amount of time."

Tucker feels inflation is manageable and sees significant growth in the Asian region going forward.

Kalpana Morparia, Vice Chairman Insurance Sector and Asset Management, ICICI Group, said given the relative level of under penetration of mutual funds among household, the future looks very bright.

According to Morparia, a large part of India's investment pipeline is geared towards creation of physical infrastructure.

Excerpts from CNBC-TV18's exclusive interview with Mark Tucker and Kalpana Morparia:

Q: ICIC Prudential has completed 10 years in India today. Where do you see the performance of funds going forward with the way markets are behaving at this point and thereby investor interest?

Tucker: Investors should think about investing for the medium- to long-term. So, investors should not think about investing in the short-term when there is tremendous volatility in the market and where the probability of getting the best value in terms of returns is low.

In these times, there are tremendous investment opportunities. But horizon that people need to think about is medium- to long-term.

Q: This could be a temporary phenomenon. But from the looks of it, this could be quite a long temporary. What should investors do?

Tucker: Their horizon needs to remain long-term. Study after study would tell you that people who invest long-term, such as Warren Buffett and other enormously successful investors, do it because of their mentality and philosophy. Equities as an asset class have always been the best performing asset class over a reasonable amount of time.

Q: Crude has cooled off a bit. But we are still seeing it above the USD 120 per barrel mark. Do you feel that at these levels, Asian economies are going to be suffering a lot more if crude continues to remain the way it is?

Tucker: Many economies have acclimatized to it already. India has dealt with inflation well for a number of years. We don't see significant changes. Inflation is manageable. We still see significant growth in the Asian region going forward.

Q: What can investors really expect from this joint venture going forward? ICICI Prudential has produced some of the benchmark funds in the industry. Going forward, are we going to see a lot more structured products coming from the asset management business?

Morparia: There is certainly a big opportunity both for structured and plain vanilla products. People feel mutual funds means only equity funds. There are debt, liquid, and regular systematic investment plan, which over a period have shown much better return. There are balanced funds as well.

Given their relative level of under penetration of the entire mutual fund ownership among household savings in India, we see a very bright future.

Q: Where do you see the whole macroeconomic picture in India going with interest rates and inflation on the rise? Do you see corporate growth slowing down?

Morparia: Not really. A large part of India's investment pipeline is geared towards creation of physical infrastructure. In some ways, not investing in this physical infrastructure is actually going to further worsen inflationary pressures to the extent that supply side bottlenecks are also feeding into inflationary pressures.

I see India continuing to sustain this investment pipeline. So, one can debate whether that number will be USD 500 billion or USD 600 billion. But that certainly is the kind of physical assets on the ground that is coming in.

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