LIC Nomura to float offshore ETFs soon

The coming fiscal will be an event-filled one for LIC Nomura Mutual Fund, which has on its priority list new offshore index-linked exchange-traded funds (ETFs), tapping the existing customer base to the hilt and introducing unique timely schemes. The CEO, Nilesh Sathe, in an interview, weighs in on future prospects, the strong areas and the issues to tackle.

What is your market outlook for the coming fiscal?

Although 2008-12 market did not give a positive return, in 2012, Nifty went up 21%. But people have withdrawn money by booking profit. When they found that they need to generate profit and minimise losses, they preferred to go out. But the investors who chose to stay invested will definitely be at an advantage as the market is likely to be more and more bullish. Tweaking some of the government policies have ultimately served the purpose. I expect the market to be positive in 2013-14. Before this fiscal ends, it can cross 21000.

What could be the main driver for this positive outlook?

Market rates of deposits are likely to come down. The rates move in a cyclical direction and have already touched the peak. If the Reserve Bank of India (RBI) cuts rates, investors may explore other investment avenues and sightly shy away from instruments like fixed deposits. Also, real estate has been a good destination for people, but all cannot park their money in such avenues.

So, the next feasible option for investors to earn more than debt return will be equity. With equity market picking up, there can be more inflows into the same.

How will be the next year for the MF industry? With Sebi’s relaxation on expense ratio for non-metros, do you think it will help tap those investors?

The MF industry has suffered quite a lot in the past few years and the total assets under management (AUM) hovered around Rs6-7 lakh core, which is around 1.5% of gross domestic savings while insurance took more than 22% and banks more than 55%. The regulator should look into this issue and make this avenue an attractive destination for retail investors. Keeping that in mind, Rajiv Gandhi Equity Saving Scheme will turn out beneficial for the industry and the investor. The 3-year lock-in will be better from a fund manager point of view, too. We have already filed one such scheme with the regulator. It will be a closed-ended equity-oriented scheme and will be available for investors in the interval of 3-6 months.

As for the second part, yes, we already have reach in those B-15 cities and with the existing customer base, we can do better there.

What is your target customer for the newly modified product with insurance cover? Why should anyone go for it, and not Ulips?

All who are between 12-60 years and want insurance at low cost and investments to grow at reasonably higher rate. Under this plan, one can avail of an insurance cover up to Rs15 lakh. Here, insurance and investment happen simultaneously. Almost 80-90% of the insurable population comes into this bracket of requirement of insurance. Here, the cover is not lapsed even if the contribution is not paid on due date, which is not the case of insurance policies. So long as his money is with us, his units will be cancelled, but the cover continues.

On product approval delays?

There were some issues for approving products and it got fixed now and we got clearance for 14 fixed income plans (FMPs).

Your offshore plans.

We are planning to float some offshore index linked ETFs that will have the flavour of Nifty-type products in which investors have not so much of risk attached to it but will grow with the market.

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