Mutual Funds

Mutual Fund “Sahi Hai” Are We Sure?

If stock market stays the way it is at this point of political environment, the MFs are in for more trouble.

Mutual Fund “Sahi Hai” Are We Sure?
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When full-time director of the Securities and Exchange Board of India , G Mahalingam launched the “Mutual Fund Sahi Hai” campaign of the Association of Mutual Funds in India (AMFI) in March 2017  to woo retail investors into the mutual funds 2017, he had said, that the cross-media advertisements  would make it easy for the common public to understand about MFs and would dispel “myths” around them.

After running it for over two years on television, newspapers, magazines internet and outdoor banners not only in metros but also in tier two cities, the campaign has gone silent, without making the common public any wiser. Instead it has left the retail investors confused and even let down by almost 2000 schemes, launched and run by a large number of Asset Management Companies (AMCs), including those floated by the banks, brokerage firms and global fund houses.

Investors had a reason to feel let down. The Sebi-mandated disclaimer, which reads or sounds aloud after every advertisement of any MF, has somewhat mentally prepared the investors about the risks associated with any exposure to the financial markets. But then, there is a feeling of assurance when big brand names and MFs of reputed AMCs launch and run their schemes. Investors have every reason to feel betrayed, when they are told that leave alone their interest income, even their principal sums are at risk. A mere Sebi disclaimer “MF investments are subject to market risk, read offer document carefully before investing” would not suffice.

When the best of the names like MF arms of HDFC and Kotak are not able to safeguard the interest of retail investors, that too in Fixed Maturity Plans (FMPs), would AMFI be able to convince again that “Mutual Fund Sahi Hai”?   It is only after a month that Sebi has woken up to the situation and issued show cause notices to the AMC arms of HDFC and Kotak, which have apparently burnt their fingers, investing in Essel Group and IL&FS companies against shares are losing their worth. The result was that investors were told  Both Essel and IL&FS have their own sorry saga , which mercifully, could be underneath several more of the fancied names, which are blindly invested in by the MFs, with thousands of crore of rupees of unsuspecting investors. Something like Rs 51,000 crore is locked in companies, which are heavy debt and run the risk of defaults.

The most important message, promoting MFs , centered  around convincing investors how they must invest in the stock market, but only through the Mutual Funds. An individual investor, has neither time, nor expertise to understand the complexities and volatility of the financial markets. So, she must invest in one or a few investment schemes of different MFs. A message is sought to be conveyed that the retail investors can rest assured, even though no assured returns are given, about their money being professionally managed. All that they need to do is to check the Net Asset Value (NAV) of their units (investment is broken into units) and rest is left to Investment Officers of the individual MFs. Yet another broad theme is, investors must always look for long-term gains and each individual has different investment goals and therefore needs a different scheme. Fair enough, but by no stretch of imagination, an individual investor can choose among 1967 schemes currently under operation, as per the AMFI data. First, people like us commoners, require an expert in the form of a MF who would navigate our financial interests; and now we need another master expert on top who should guide us through this maze of 2000 odd MF schemes.

There are all kind of jargonized names given to these schemes like: Multi Cap, Large Cap, Value Fund, Contra Fund, ELSS, SIP and so on. If the stock market stays the way it is at this point of political environment, the MFs are in for more trouble- Investors would be left with no better option than good old bank fixed deposits, even at lower rate of return.        

 

Chawla is a New Delhi-based journalist .

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