WF: Industry AUM reached a new high of Rs.8 lakh crores in November 2009 - which few people would have predicted in January 2009. Do you see the industry AUM crossing the magic 10 lakh crores figure in 2010 ?

Ved Prakash: The mutual fund industry in India has grown steadily over the last two decades. In the past 6 to 7 years the pace of growth has accelerated both for the equity and the debt asset class. While in some periods of time the equity asset class has grown more rapidly, in other periods the debt asset class has shown more rapid growth. In the last one year we have seen significant inflows into the debt asset class which reflects the significant liquidity available in the system. In our view as we look towards the year 2010 we hope and aspire for high growth rates and the magic figure of Rs.10 lakh crores. However, this will be dependent on the markets and the kind of liquidity which is there in the system.

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

Ved Prakash: Big trends happen over a period of multiple years. One of the great mega trends which will come to the Indian capital markets will be the shift of savings from passive management to more active management. This would mean a greater need for financial advice, greater level of investment in financial assets, etc. For this the penetration of financial advice in our country will have to go up manifold over the next 5 years and 10 years. This spells great opportunity. However, at the same time technology will transform the way people transact and the way financial advice is given. The time spent on transacting and the cost of transactions will come down as electronic facilitation takes over the current paper based system. Similarly, premium will be placed on ability to give quality advice rather than simply enabling access and a transaction in some mutual fund scheme / NFO. The charging of financial advisory remuneration will also get directly linked to financial advice and the quality of outcome. The concept of performance fees for quality advice and quality outcomes will make its mark in the Indian market. Whatever happens there is no doubt about the fact that when we look back on this period many years from now, it would have been a period of a revolution in the number of people who give advice, the way advice is given, quality of financial advice and the number of participants in the Indian capital markets.

Similarly, from a mutual fund's perspective the complexity of asset classes will increase. New asset classes viz. real estate, infrastructure funds, funds investing overseas in newer opportunities / frontier markets, etc. will make their advent. Business outsourcing will further accelerate as fund management companies increasingly narrow their focus on the core businesses of managing money, communicating and providing access / interface with the advisory sales network.

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

Ved Prakash: We feel that 2010 will be a year of change and evolution for the mutual fund industry. It is also our view that this year will see good cheer in our equity markets. However, our sense is that if inflation goes up as anticipated, there would be some upward bias on interest rates in the first half of the year and hence an impact on bond markets.

In light of this, we are first of all focusing on an extensive distributor 'financial advisor connect' programme where we hope to make face to face contact with all key distribution partners in the first three months of the year. Similarly, our focus will be on some of our key products viz. the Tata Pure Equity Fund, Tata Equity Opportunities Fund, Tata Infrastructure Fund and Tata Equity P/E Fund, all of which have a very good long term record. Our advice to our clients is to be careful in long bond funds. On the equity side our sense is that our economy and the markets present very good long term opportunities. From a short term perspective our markets have run up sharply and we need to be careful. We feel that increasingly financial advisors who can provide high value advice will benefit from the changes happening. In line with this our effort would be to work with our valued financial advisory partners to ensure that together we equity ourselves to provide the best possible advice to our investors.