WF: Industry AUM reached a new high of Rs. 8 lakh crores in Nov 09 - which few people would have predicted in Jan 09. Do you see the industry AUM crossing the magic 10 lakh crores figure in 2010?

Sundeep: If you see the penetration level of MFs in the Indian household, you will be convinced that the Industry is here to grow big. Numbers will only be a matter of time.

WF: One of the biggest challenges that the industry is facing is that despite a sharp recovery in equity markets, net inflows are not coming into equity funds over the last few months. Why is this happening and what can be done to remedy this situation?

Sundeep: Improvement in the global macroeconomic fundamentals, with a rising risk appetite, has seen infusion of money into stock markets. We expect the corporate earnings to be around 15-20% in the coming year. After 2008 retail investors have burnt their fingers very badly in the market. Last year when markets were falling retail investors were redeeming money and when markets had a rally a lot of retail investors missed the rally and were left waiting trying to time the market. Financial literacy and investor education will play a key role in ensuring that this doesn't happen again. I believe it is a process and a single trigger that will get the investors back to the markets/MFs.

WF: 2009 saw two big developments for the industry: the ban on AMCs charging entry loads and the emergence of stock exchange platforms for mutual funds. How do you see these developments from an industry perspective?

Sundeep: In terms of cost saving, the decision of ban on entry load might not be very advantageous currently to the investors, but the transparency factor that this decision brings will be beneficial to investors in the long run. Today, many retail investors depend on distributors for investment advice. Ultimately, the cost of sound financial advice will be levied to the investor but the investor can choose whom he wants the advice from and the amount of money that he is willing to pay for the advice.

SEBI has recently allowed transacting of mutual fund units on stock exchanges. This platform will help in elimination of paper work, faster execution and bring in a lot of convenience for investors. I believe in long run these moves are definitely going to benefit the investor and all the stakeholders in the industry.

WF:What do you see as the big trends for 2010 - from an AMC industry perspective and from a distribution perspective?

Sundeep: AMC Perspective

• Currently India has a wide range of asset class categories for retail investors.

• NFO are things of the past and schemes with track record for the best performing funds in different markets conditions over longer period of time will attract investors. So we will be launching new funds but only when we believe there is a real value-add for the investor.

• Not only products but introduction of new features will be one of the key factors for market growth. Past innovations like SIP, SIP & Insurance and now intelligent systematic investment plans are examples of innovative new features that have added value to our products as well as given additional benefits to investors.

Distributor perspective

• We may see shift in distribution services from a transaction-based model to an advisory model and more of value-based services.

• We will see increased focus on Debt/Liquid schemes as a result of enhanced asset-allocation process, instead of the conventional dependency on equity class. Just for reference; out of the total 4 cr odd industry folios not even 30 lacs (i.e. less than 10%) are in Debt/Liquid schemes.

• Emergence of low-cost transaction mediums like online-investment facilities , exchange platforms

WF:What are your plans for 2010 - products, investment management, distribution, communication? What are your key focus areas going to be this year?

Sundeep:Five broad key initiatives that we have planned for this year are:

• Work on new methods on investor education and undertaking no. of training sessions on different product/schemes to educate the distribution fraternity. We will do this with the help of our in-house training academy "EDGE"

• Endeavour to launch newer products/features/facilities and asset classes (like Gold & other commodities) to provide investors a complete gamut of investment avenues.

• Distribution expansion in Domestic and NRI markets .Promotion of debt & liquid asset classes with the help of low-cost convenient mediums like online investments.

• Aggressively target Tier 3 and Tier 4 cities to add new set of investors by using an entry level strategy of Systematic Investment Plans especially the Micro-SIPs.

• Expanding PMS footprint will be one of the key focus areas for this year.

WF:A number of distributors have shifted focus to alternative products like company FDs and insurance. What can be done to get them to re-focus on mutual funds?

Sundeep:Constant touch with investors, irrespective of market conditions is very important for relationship management.

• Upgrading service-levels will be key to cater to the changing advisory needs of investors.

• Promoting asset-allocation strategies with the help of liquid & debt schemes will help the distributors increase the wallet-share from investors and get a steady revenue flow.

• Lastly it is important to work on increasing the investor-base with the help of various acquisition strategies

WF:Some observers believe that flows from Tier II and Tier III cities have more or less vanished and that business is getting concentrated back into larger cities. Is that a trend you see in your business? How adversely have market penetration initiatives been impacted over 2009 and what can be done to enhance penetration into smaller towns in 2010?

Sundeep:On the contrary we still have the Tier-III & Tier-IV cities contributing around 50% to our retail-base. The introduction of the exchange platform will help increase market share from these cities. Micro-SIP will also play a very important role in acquiring new investors from the Tier-III & IV cities.

WF:Platforms have been one of the big buzz words in 2009. We have seen the emergence of stock exchange platforms, the joint CAMS-Karvy advisor platform FINNET and we have an AMFI platform in the pipeline. In parallel, we have a number of super-distributor platforms meant for IFAs. In 3 years time, what role would platforms have carved out for them? Do you see a trend of IFAs gravitating towards platforms?

Sundeep:Technological solutions will play a critical role in the new environment and hence any technology initiative which will benefit distributors will be welcome as it will help them to increase their reach and efficiency to serve customers.

WF:What are your key messages for your distribution partners as we begin a new year?

Sundeep:There is huge opportunity for Mutual funds in India and there is big demand from investors who want to avail the benefits of investing in MFs .As mentioned earlier the MF industry is poised to grow exponentially from here on and any change that is good for the investors will be good for the entire industry in the long-term.

We are extremely positive on the future of the MF industry and hence distributors must be in touch with the investors and try to adapt rapidly to the new developments with the help of AMCs (like enhancing advisory services, use of exchange platform/ online facilities, etc). This will help distributors to partner the growth of this Industry.

We wish everyone a very successful 2010.