Our major focus would be on attracting retail equity assets: DBS Cholamandalam
Business Line

October 22, 2006: Yes, the indices have zoomed all right, notes Mr Rajnish Narula, CEO, DBS Cholamandalam Mutual Fund, in a reference to the recent increase in stock prices, including what was seen last week.

However, he adds a caveat or two to his observation: "Investors would do well to have realistic expectations... the next 3 to 5 years may well see 12-15 per cent returns per annum".

Excerpts
Some months have passed since the joint venture between Chola and DBS has commenced business.

How is the market shaping up for it?
DBS, as you may already know, happens to be among the largest financial services groups in Asia with operations spanning 15 countries. It has leading positions in asset management, consumer banking, treasury and markets, securities brokerage, equity and debt fund raising.

The fund management business run by DBS currently extends over a number of product categories. Its core competencies are in global fixed income, Asian equities and absolute return strategies.

In India, the newly-formed asset management joint venture has the opportunity to leverage the strengths of the DBS group.

I am particularly referring to areas such as quality of investment management, introduction of new product categories and improvement in operational efficiency. The idea is to create a certain value proposition for investors and distributors.

Your asset base is relatively small. What are major issues that this leads to?
Well, while size is an issue to contend with, we believe it would not be a major hindrance to building our asset management franchise.

We would like to grow by attracting quality long term investments in our schemes and delivering what I would like to describe as "dependable" performance. Our major focus would be on attracting retail equity assets. And we would do that by working closely with a fewer set of preferred distributors.

DBS Chola does have a range of products, including quite a few on the equity side, each with a clear set of attributes.

In a situation where the equity indices are moving up again, what are your views on the equity market?
It is true that the market has displayed a certain degree of resilience. However, we maintain that investors should have realistic expectations.

To expect 12-15 per cent returns per annum over the next 3 to 5 years is, in a manner of speaking, realistic. As statisticians would no doubt tell you, domestic economic momentum looks strong at the moment. This would perhaps continue to be so. All this, one hopes, would lead to a good growth in corporate profits.

Mind you, global risk factors in terms of liquidity tightening and crude oil hardening have reduced considerably in recent times. However, as always, these would need to be monitored closely by all those who are interested in knowing about latest trends.

Debt, some sections feel, may turn the corner soon. Do you agree? What can change the way investors consider debt funds in India?
It is expected that some amount of volatility would continue in the debt market. While certain important global factors would allow the interest rates to remain soft, strong domestic growth would keep the upward pressure on interest rates. We continue to urge investors to remain focused on short duration assets, income funds included.