HSBC Asset Management (India) Pvt Ltd is part of the core global investment business of the HSBC Group, trading worldwide as HSBC Investments. In four years since its launch, HSBC Mutual Fund is managing assets of nearly Rs 10,000 crore spread across 19 schemes. Manoj Ahuja spoke to HSBC Investments in India Chief Executive Officer Sanjay Prakash who was in the City to launch a new fund. Excerpts:
With so many investment options, how does a small retail investor decide where to invest his hard-earned money?
The first thing is to select a good investment advisor who you can trust with your money. This person should draw a financial plan for you, identify how much money you can invest and what your risk appetite is.
The problem is that people want high returns, but are averse to taking risks. Once this is final, there are so many (mutual fund) companies to choose from looking at the aspects like brand, track record, ethics and transparency, and processes they follow. That is how you decide which scheme is best for you. I prefer people not going to sectoral funds, which are for very mature investors.
Why only mutual funds, why not bank fixed deposits?
You have to take good risk. Prices are going up dramatically, and so, investing in FD is not enough. You will not get good returns (in FD) now. So, it is very important to put some money in equity, in a diversified equity fund. If you look at cumulative annualised returns from 1985 to 2006, the returns for equity is highest at 17.9 per cent.
What is your investment philosophy in equities?
We are ‘business cycle, relative value’ investors. Our investment philosophy is a blend of value and growth. When it comes to macro economic view we follow top-down approach and for stock selections we follow bottom-up approach. The style is modified to suit the prevailing economic conditions. We are four-years old now, and if you look at our main equity fund, it is one of the top performing funds.
The equity market is at all time high. Does it make sense for a new investor to enter the market at this point in time?
Any investor, if he wants to get into equity, must have a 3-5 year horizon. We are a big believer of systematic investment plan (SIP). See, in late April or May you would have said the same thing, but we said keep on investing. A lot of people said withdraw (from the market) but now that has destroyed value for those investors. At that time, the Sensex was 9,000 but now it is 13,000. Investors need to invest for long term.
But you have to book profits at some point in time?
It is like this. You (as an investor) have a goal in mind. In my case, I want to educate my children well. So, I have been doing SIP for last seven years. I will book profit only when I think depression is coming.
How do you see stock market performance in the coming years?
The market should continue to do well, but not at the same pace. You will see corporate earnings growing at a healthy rate, but a lot has clearly been discounted. The market will track the corporate earnings.
What are the risks going forward?
All are global factors. Oil is one of the biggest factors. Global liquidity flows to emerging markets is a factor. If that liquidity comes down then stocks will come down. But our economy is quite resilient. Even when (crude) oil prices had shot up, only the oil companies were affected. Locally, it is politics and interest rates.
Any advice for mutual fund investors?
The basic advice I will give is don’t get swayed by popular sentiments. Stick to your asset allocation plan. Let’s say your allocation plan is 70-30 in favour of equity. Now, if market goes up it could become 80-20. So you should cut it back. Every six months reallocate it. Maybe your needs have changed. Be honest to yourself.