"Our goal is to ensure mutual funds remain a cornerstone of wealth creation"

Investors are increasingly incorporating passive funds into their strategies, and the industry is exploring new themes and benchmarks. In this context, Shamsher Singh, Managing Director and Chief Executive Officer of SBI Mutual Fund, presents his views on the current mutual fund scenario.

SBI Mutual Fund is the largest fund house by assets under management (AUM) in India. What key factors have driven this significant growth, and how do you maintain leadership in such a competitive market?
At SBI Mutual Fund, we are dedicated to integrating Bharat into the India growth story through mutual funds. For investors beyond the top 30 cities, we focus on diversified and less volatile offerings like Hybrid Funds, solution-oriented funds and diversified equity funds. Our commitment to transforming savers into investors has enabled us to welcome many new investors in the fund house and ultimately the industry.

With strong support from our parent organisation, State Bank of India, we cover around 98 per cent of the pin codes in the country. Our joint venture partner, AMUNDI, has helped bring international standards to our risk management and investing processes. Broadening our customer base, ensuring consistent risk-adjusted fund performance with a focus on risk management, and providing clear, timely communication are the key factors I believe are behind our leadership in this competitive market.

How do you assess the current Indian equity market landscape considering factors such as economic growth and geopolitical tensions?
The Indian equity market is dynamic, driven by economic growth and geopolitical tensions. Conflicts in the Middle East and South Asia have increased market volatility. However, India remains one of the fastest-growing economies, with significant investments in renewable energy, electric vehicles (EVs) and artificial intelligence (AI). Foreign portfolio investors (FPIs) have injected substantial funds into Indian equities and debt markets, enhancing market attractiveness.

Despite geopolitical challenges, the market is resilient due to strong fundamentals with Indian corporates well-positioned in the profit cycle and a rising profit-to-GDP ratio. The markets are expected to favour companies with strong business models, long-term growth potential, and sustainable cash flows. We remain optimistic about earnings in the medium term and believe the market will become increasingly discerning.

There has been a noticeable rise in passive investment. How do you see the evolution of passive funds, including index funds and ETFs, in the Indian market?
The future of passive funds in India looks promising, with AUM reaching Rs 11.20 lakh crore. Both passive and active funds play a role in diversifying portfolios. The creation of new indices broadens passive investment opportunities. Investors are increasingly incorporating passive funds into their strategies, and the industry is exploring new themes and benchmarks. Recent indices like the Nifty Tourism index and Nifty Capital Markets index cater to evolving investor preferences, offering exposure to growth sectors. These indices provide targeted strategies for both retail and institutional investors, expanding the landscape of passive investment opportunities.

Thematic and sectoral funds are becoming increasingly popular among Indian investors. How are you capitalising on this trend and what is your outlook on these products in the coming years?
Thematic and sectoral funds are gaining traction among Indian investors, offering unique exposure to high-growth areas and complementing traditional strategies. Supportive government reforms and regulations are fostering sector growth, and providing capital appreciation opportunities. As asset managers, we are launching new offerings to fit diverse portfolios. Looking ahead, we believe these funds will continue to grow in popularity as investors seek to diversify and capitalise on specific economic trends. We are committed to expanding our offerings and providing innovative solutions to meet the evolving needs of our investors.

With the recent U.S. Federal Reserve rate cut being implemented, how do you see the demand for fixed-income mutual fund products? Are you seeing increased investor interest in debt schemes amid the current market environment?
The recent U.S. Federal Reserve rate cut suggests the end of rising interest rates. Globally, central banks will focus on domestic inflation factors. In India, the Reserve Bank of India (RBI) kept the repo rate at 6.5 per cent and shifted to a ‘neutral’ stance, hinting at a possible rate cut in December. Future rate cuts could boost debt mutual funds as rates drop, increasing their value. While there’s growing interest in the Indian debt market, it’s not yet widespread due to recent tax changes.

SEBI has introduced several regulatory changes to protect investors and improve transparency in the mutual fund industry. How has SBI Mutual Fund adapted to these evolving regulations, and what are your thoughts on the impact of these reforms on the industry?
SEBI has introduced significant regulatory changes to enhance investor protection and transparency in the mutual fund industry. SBI Mutual Fund has adapted to these reforms, which are expected to foster a more secure and investor-friendly environment. Enhanced liquidity, transparency and cost reforms will build investor confidence and make mutual fund investments more attractive, especially for retail investors. These changes will lead to a more robust and resilient mutual fund industry, benefiting both investors and fund houses. At SBI Mutual Fund, investor protection is paramount, and we welcome SEBI’s initiatives.

Mutual fund penetration in India is still relatively low compared to global standards. What efforts is SBI Mutual Fund making to increase financial literacy and spread awareness about the benefits of investing in mutual funds?
We have significantly raised awareness about the benefits of investing in mutual funds, leading to a growing number of investors nationwide. The impressive monthly SIP inflow of Rs 24,509 crore reflects the success of the ‘Mutual Funds Sahi Hai’ campaign and the trust investors place in mutual funds. This growth reflects the trust and confidence investors have in mutual funds as a reliable investment avenue. We are committed to maintaining this momentum and are confident in continued growth. Our focus remains on educating and empowering investors about the long-term benefits of disciplined investing through mutual funds.

Considering the recent market corrections and volatility, what advice would you offer to retail investors who are unsure about their mutual fund investments? How should they approach SIPs and long-term wealth creation in this environment?
We advise investors not to be perturbed by market volatility, as it is inherent to the markets. Instead, we encourage entering the capital markets through SIP (systematic investment plan), which mitigates volatility through rupee cost averaging and helps accumulate wealth over the long term. We emphasise topping up SIPs to maximise compounding benefits and educate our customers on disciplined investing. As we innovate and adapt to meet evolving investor needs, our goal is to ensure mutual funds remain a cornerstone of wealth creation for millions across India. By staying responsive to market changes and investor preferences, we aim to build a robust and resilient investment ecosystem that supports our investors’ financial aspirations.

Disclaimer: The opinions expressed above are personal and may not reflect the views of Dalal Street Investment Journal.