Navneet Munnot, Chief
Investment Officer, SBI Funds Management Private Ltd,
joined the company in December 2008.He is a postgraduate in accountancy and
business statistics and a qualified Chartered Accountant. He is also
a charter holder of the CFA Institute USA and CAIA Institute USA. He is also
an FRM charterholder of Global Association of Risk professionals (GARP). He
brings with him over 15 years of rich experience in Financial Markets. Most
recently, he was the Executive Director and head- multi strategy boutique with
Morgan Stanley Investment Management. Prior to joining Morgan Stanley Investment
Management, he worked as the Chief Investment Officer - Fixed Income and Hybrid
Funds at Birla Sun Life Asset Management Company Ltd.
SBI
Mutual Fund is a joint venture
between the State Bank of India and Société Générale Asset Management,
one of the world’s leading fund management companies
that manages over US$ 500bn worldwide. In twenty years of operation, the fund
has launched 38 schemes and redeemed fifteen of them.A total of over 5.8 million
investors have reposed their faith in the wealth generation expertise of the
Mutual Fund. Today it is India's largest bank, patronised by over 80% of the
top corporate houses of the country.
Speaking with Meenakshi
Patki and Yash Ved of India
Infoline, Navneet Munnot says "The investor
must maintain discipline of asset allocation and invest in line with their time
horizon and risk appetite."
With positive
expectations on corporate profitability, how are you reading the market?
Given the strong economic growth, improvement in corporate profitability and the
announcement of further economic reforms, we expect corporate profits are likely to grow
around 20% in next year and stock market should deliver that kind of return over the next
year. We have seen expansion in PE multiple, this year return should be more driven by the
earning growth, which are expected to grow around 20% in the current year. The other thing
that investors should watch is the supply or issuance because large amount of equity
issuance from the private sector and PSUs are expected. At the same time, lot of equity
flow that we expect, both from domestic as well as foreign investors.
What are the
changing trends as far as mutual fund industry is concerned?
In India, we have a very high savings rate in the world, but very small part of the
household savings actually come into capital market. Over a period of time, we expect that
increased share of household savings would come into the capital market. Given the reach
and strengths that mutual fund industry has built, over a period of time, the industry is
likely to grow a lot through larger investments of household saving into the capital
market.
What is your
take on inflation?
Probably, we would be close to double digit in March but from thereon , if monsoon is
good, our expectation is that the global commodity prices are likely to stablize at
current levels. We expect inflation to trend downwards from April onwards. On an average,
it should be between 5.5%-6% in a year.
What is your
view on the dollar?
The dollar is likely to do well compared to most of other developed world currency,
because we believe that on a relative basis, US economy and markets are better placed than
Europe and Japan.
At the same time, given the growth
differential and the attractiveness of emerging economies, dollar is likely to depreciate
against emerging market currencies, particularly, the Asian currencies. So, we believe
that rupee will have structurally appreciating bias over a long period.
What is your
take on gold?
Gold should be used as hedge in the portfolio rather than looking at the price movement in
the short term. In case of any extreme outcome in the global economy like severe
deflation, huge policy stimulus, high inflation scenario - in all these scenarios, gold
will do well. Investors should keep part of the portfolio in gold just as a hedge against
any of the extreme outcomes.
What is the
outlook on the global and Indian economy?
The policy stimulus that was given after the credit crisis of 2008 is simply unprecedented
in history both in monetary and fiscal stimulus in terms of scale and magnitude. The
synchronized nature in which it was done is simply unprecedented. The result of which has
been a stabilization in the economic environment and of course the financial markets have
responded well. Going forward, we believe that most of the developed world for an extended
period would grow at a sub-trend growth rate due to a variety of reasons, while the engine
of global growth would be the emerging economies like India, which are more dependent on
domestic consumption and domestic investment. I believe that countries like India, which
are less dependent on exports and on global growth and have primary drivers as domestic
consumption and domestic investment and also have high savings rate and under leveraged
balance sheet of both households as well as financial sector have a very bright future. We
will see divergent trend where large part of the developed world would grow at a sub-trend
rate while economies like India would grow at a reasonable rate; maybe 7 or 8% or more
than that.
What is your
GDP growth forecast for FY11?
The GDP forecast should be anywhere between 7.25%-7.5% for FY10 and 7.5%-8% for FY11.
What is your
AUM?
Our Asset Under Management is around Rs380bn.
Which are the
sectors you are bullish and bearish?
From here on, we believe that it is going to be a stock pickers’ market. What is
going to be more important would be the stock picking skills rather than the broad macro
or sectoral calls. The two themes that we like are the infrastructure development spending
and the domestic consumption. There are several businesses within these two broad themes,
which are the ones that we like. There are no sectors that we are negative on and we see
opportunities across all sectors.
Brief us about
your stake in Sagar Cement?
We are positive on some of the cement companies.
Any new funds
in the pipeline?
We have filed with SEBI for PSU fund. Where there are gaps in product portfolio, wherever
we are not present ,we will try to fill the gap.
Could you elaborate
on the revenue pie/ revenue generated from your debt based funds and equity
based funds?
In terms of AUM we have roughly around Rs190bn in equity and Rs190bn in fixed income.
Brief us about
your balanced funds?
65-70% of funds invest in equity and 30-35% is invested in fixed income securities and
both parts of the portfolio are actively managed. The equity portfolio is created through
the bottom up stock picking while duration and asset allocation on fixed income side is
also done on our top down view on interest rates and strategies.
Your advice
to retail investors?
The investor must maintain discipline of asset allocation and invest in line with their
time horizon and risk appetite. Sharp movements in all the financial markets for the last
two years have clearly highlighted the fact that a discipline of asset allocation and
ability to make swift moves are very critical for every investor. One should believe in
long term potential of Indian economy and markets. One should look at equity markets as a
long term investment. Similarly, fixed income markets also provide good opportunities to
the investors. Some part of the portfolio should be in other alternative assets like gold
and real estate. It is important that the assets allocation should be planned and in line
with each individual’s risk appetite, time horizon and return expectations.