Wealth Forum Advisor Confidence Survey: 2015
Parts II and III : Market & Product Confidence
Champion IFAs score a neat hat-trick!


In the first part of this 3 part article series, we discussed the findings of the Business Confidence section of the 4th annual Wealth Forum Advisor Confidence Survey, which was conducted in June 2015 (Click here to see Part I). 213 leading IFAs from 42 cities across India - business and opinion leaders of the IFA fraternity - shared their perspectives in this survey. In this section, we discuss their outlook on markets and products.

One thing that comes out clearly is that our champion IFAs have an uncanny ability to call markets right, time after time! They have got their Sensex predictions right 3 times in a row - a neat hat-trick! What's their call now on markets? Where do they see equity and debt markets by March 2016? Which product categories are they most comfortable recommending to their clients? Which product categories do they not want to recommend? Read on to get a pulse of the leaders of the IFA fraternity on their market and product confidence.

Part II : Market Confidence

Market confidence - equity: IFAs score a hat-trick!

We reported last year that our survey respondents had got their Sensex call right on both the previous occasions and wondered whether they would achieve a hat trick with their forecast for Sensex levels in March 2015, which they made in July 2014 (Will it be a hat trick?)

Turns out that they have done it again! The average Sensex level predicted by our 198 respondents last year for March end 2015 came in at 28, 862. On 31st March 2015, the Sensex closed at 27,957 - barely 3% away from the prediction! Survey respondents: please take a bow! Fund managers - watch out, you've got competition!

What are our champions forecasting now for March 2016?


The magic number is 30,112 for March 31, 2016 (derived by taking the mid-points of all the 5 ranges and weighting them by %age of responses for each range). That's some 8% higher than the 27,800 levels we find it today (6th July 2015), as we write this report. So, even as the world wonders about how Greece and China will roil global markets, our champions believe that dips if any, are unlikely to be long lasting, and that the market will cross the 30,000 levels by the end of this financial year. If they get this call right, as they seem to be doing all the time, the Sensex would have delivered an 8% return for the financial year 15-16. A mildly positive year coming on the back of a big year, is a pretty good outcome, especially since many fund managers expect FY16-17 to be a big year for earnings growth and therefore for markets.

Market confidence: debt


A majority of respondents seem to agree with debt fund managers that we will see a gentle gliding down of interest rates for the rest of this fiscal. 62% believe we will be in one band lower than where we are today, while 37% believe we will remain in the same band of 7.5% - 8.5% by March 16. If the average call of our respondents at 7.4% turns out to be correct, income and gilt funds can give reasonably healthy returns over the next 9 months of this fiscal.

Market confidence: currency


While the average forecast of Rs.64.60 to a dollar suggests that leading IFAs do not expect the rupee to depreciate much from the current level, a sizeable 39% believe that the rupee will slide down to the next band of Rs.65-70 to a dollar. Almost nobody is calling for any sharp appreciation of the rupee to above Rs.60. The call therefore seems to be a range bound rupee, with a downside rather than an upside risk.

Part III : Product Confidence

Equity Funds


Advisor confidence in recommending equity funds has been consistently rising over the last 3 years, which is indeed a heartening sign. Confidence in recommending equity SIPs, at 9.5, is perhaps as close as it can get to a perfect 10. There is clearly widespread belief that this bull market is here to stay and that SIP is the way to participate in this market.


While confidence in equity funds is consistently rising, preferences are clearly shifting. Enthusiasm on mid and small cap funds has waned considerably, as the valuation gap closed last year. Diversified funds continue to be firm favourites and interest in large cap funds is perking up. Sectoral and thematic funds continue to be largely ignored. The steady Y-o-Y rise in confidence in multi-cap funds is something that product teams at fund houses should take note of.


This will surely come as a disappointment for those fund houses which have been consistently talking about the merits of global diversification. Our leading IFAs are not exactly buying this argument, and interest in this product segment is waning, as can be seen from the drop in scores over the last year.

Among the few who are interested, US equities and global equities are the clear favourites. Outliers like EM or Europe are not in favour. The relatively new category of stable equity funds that were launched over the last 12-18 months, don't seem to have caught advisor fancy yet.

Product confidence - debt


Confidence in bonds and company deposits is falling, while it is rising for debt funds - as would perhaps be expected in a declining interest rate environment. Given the substantial amount of money that was flowing into bonds and deposits over the last few years, this shift in confidence suggests big opportunities ahead in the debt funds space.


Accrual / credit opportunities funds seem to be the firm favourite for investment horizons of 3 years and above, with advisors in the North clearly loving this product category. While the attraction of accrual funds for long term surpluses is completely understandable, the relatively muted confidence in dynamic bond funds for 3 year money is a little surprising. If we believe interest rates are gently heading down, and we believe that dynamic bond funds have the capability to navigate this trend which often gets choppy, why would confidence not be higher than the current score of 33%. Yes, it has moved up from 23% to 33%, but the question that fund houses would do well to reflect on is what is making advisors somewhat circumspect about this "all weather" duration strategy? Is it performance or positioning or perhaps a bit of both that need to be addressed?

For 12-18 month money, its clearly short term funds that is the favourite, followed by accrual and then dynamic bond funds. FMPs even for 12 month horizon find few takers - again understandable given that we believe we are in a declining interest rate environment.

Product confidence - hybrids


Confidence in recommending hybrids is increasing perceptibly in all regions except South, where advisors perhaps prefer to manage asset allocation themselves through pure debt and equity funds. But the big story in hybrids is the marked shift in preferences across products within this category.


While balanced funds continue to be the firm favourite, MIPs have completely fallen off the radar, and Cap Pro funds too seem to be receding in advisor confidence. The new product category within hybrids - Equity Income Funds - has established a solid mindshare among leading advisors, quite early in the product's lifecycle. This year, we asked advisors to also score their preference for model based asset allocation funds - an emerging category within hybrids - and the numbers reflect quite a healthy appetite for these funds.


These are numbers that we would really ask product and marketing teams at fund houses to reflect on. Balanced funds are now a firm favourite as a default allocation in any client portfolio, given the tax advantages. With high levels of confidence in balanced funds for the core portfolio across the country, and great performance track records, is the industry really doing enough to promote balanced funds in a big way? Are we doing enough to directly link balanced funds to life goals and push sales momentum to the level we ought to? Are we giving disproportionate coverage to equity funds, and not doing enough justice to promoting balanced funds to the extent we ought to?

Product confidence - arbitrage funds


Last year, arbitrage funds shot into the limelight, as they continued to enjoy tax breaks that were taken away from debt funds. The good news is that confidence in this product category is actually growing, with North and West showing appreciable jumps in confidence levels over last year. This is no flash in the pan - this product category seems here to stay.

Product confidence - gold funds


If we thought confidence in recommending gold funds hit a nadir last year, well this year, it sank even further. Can it sink any further? Well, technically, it can go down to 1 - but this is perhaps as low as it gets. Among the entire product spectrum that mutual funds have to offer, this is now the least loved segment. Time for a contrarian buy call?

Product confidence - insurance


All the restructuring of ULIPs that IRDA mandated, does not seem to have made a big mark in advisor confidence in ULIPs - at least among our respondents. The overwhelming favourite within insurance products is the good old term plan. Pension plans also do not find much favour among our advisors - perhaps the solutions they create are far more effective than pension plans from insurance companies.

To conclude

Two big messages seem to be coming out from all of this data: (1) Our champion IFAs have an uncanny ability to call markets right, time after time and (2) the leaders of the IFA fraternity like to keep things simple. SIPs and term plans are the overwhelming favourites, and for SIPs, diversified and multi-cap funds are the favoured ones. There is clearly merit in simplicity.

Share this article