The Association of Mutual Funds in India (Amfi) has started advising investors that cryptocurrencies are not equivalent to equity or any other financial instrument, said A. Balasubramanian, Amfi chairman and managing director and chief executive officer of Aditya Birla Sun Life AMC, in a recent interview with Outlook Money.
“Cryptocurrencies are not regulated by either Sebi, the Reserve Bank of India (RBI) or the Insurance Regulatory and Development Authority of India (Irdai). Therefore, investors need to be extremely careful, given that it is more of a speculative investment. Amfi has recently come out with an advertisement to educate investors on why one needs to invest only in regulated instruments,” he said.
Talking about the significant crash in cryptos in the last few months, Balasubramanian explained that often people didn’t want to talk about their losses, but only their profits. The crash will make investors realise soon that cryptocurrencies “are not the same as financial instruments, such as mutual funds”, he said.
“Most people only take pride in telling others when they make money. This also means that eventually most people will quietly move to the financial markets and mutual funds,” he said.
Talking about the scenario in the fixed-income market, now that interest rates are rising, he said the risk-reward ratio is higher for these instruments. “The rising interest rate cycle will see target maturity funds, and three-to-five-year duration funds making a comeback,” he added.
The Amfi chairman expressed optimism on the growth of mutual funds in India. Balasubramanian said that the record number of demat accounts that have opened in the past few years will translate into mutual fund investing in the future as investors move from direct stocks to funds. “We believe the potential size of the industry could reach Rs 100 lakh crore in the next five-to-seven years,” he said.
What will aid the growth of the industry is the fact that penetration in deeper parts of the country has been increasing over the years. “Penetration has increased ever since the Securities and Exchange Board of India (Sebi) first introduced the B15 (cities beyond the top-15 in the country), and then B30 (Sebi incentivizes fund houses to increase penetration in smaller cities). To that extent, expansion is taking place,” said the Amfi chairman.
