Mr. Krishnamurthy Vijayan is a veteran in the mutual fund industry with a background of 15 years. He honed his skills in UTI where he was part of various prestigious projects including organisational review, technology upgrade project, setting up of Registrar Co-ordination Cell and starting UTI – Institute of Capital Markets. He then moved on to Jardine Fleming and worked on the team that set up its mutual fund business in the country.

Currently he is the Chief Executive Officer (CEO) of JM Mutual Fund.

In an interview to personalfn.com, Mr Vijayan shared his views on the markets, the interest rate scenario, the future of monthly income plans (MIPs) and the outlook of the mutual fund industry against this backdrop.

PFN: What is your view on the markets?

Mr. Vijayan: Equity markets are a little unstable now, not moving in any one direction. I think we will see a major movement only after the rupee stabilises against the USD. That could take a little time because the Reserve Bank of India (RBI) plays a very dominant role in stabilising the rupee. So it’s not going to be overnight when it finds its own level. The same applies to debt markets. On a daily basis we are in a stage where we are witnessing an inverted yield curve, however, I think that trend should reverse in a months time.

PFN: When do you see the interest rate roll-back, if any?

Mr. Vijayan: I can’t really make a call on that. As a fund house JM Mutual Fund took a very conservative stand on that issue. I think by and large the market view was that after the provident fund (PF) rate cut there would not really be any hike in interest rates for sometime. However the situation changed and that has affected a lot of funds. We ourselves saw the rupee getting nervous and went into cash in line with our basic philosophy of being conservative fund managers. But in a situation where you really can’t predict the regulators’ stand, it is difficult to take a stand on the roll-back.

PFN: Personally what do you advocate, a weaker rupee or a stronger rupee?

Mr. Vijayan: Very difficult to say. On the one hand the weaker rupee will help exports, and a larger sum of money could come into the country by way of investments, but a weaker rupee can also make imports very expensive and the oil pool deficit is an ever-looming problem. What I really believe in is that the markets should be allowed to prevail and the rupee will find its own level.

PFN: What is your view on the mutual fund industry as it stands today?

Mr. Vijayan: Earlier investors used to perceive mutual funds as an extension of the stock market and consequently they came in large numbers to invest in high-risk funds. But over the last few years we have seen that perception change positively, as mutual funds began to be seen as managers of risk and returns.

So long as this perception persists among investors, and the Association of Mutual Funds in India (AMFI) is taking the initiative in this regard, and if fund managers also keep this up, I think the industry is in for a very bright future.

On the other hand if we have a lot of discount brokers, or mutual funds chasing large accounts taking a short-term view on the markets, for a quick buck, the industry could be in for a very difficult time.

n that sense as an industry, we are moving towards becoming managers of risk as well as managers of return. While this process takes place and we have a competent qualified and regulated financial intermediary, this industry will move from strength to strength.

PFN: How will the volatility in the markets affect this perception?

Mr. Vijayan: Its going to happen despite the volatility in the markets. Ultimately we are intermediaries between the investors and the market. There are bound to be ups and downs in the markets. But there is a very strong trend towards developing actual communication with the investor and while that happens, money will flow in the industry be it in equity funds, debt funds, assured return schemes, monthly income plans (MIPs).

PFN: Speaking of assured return schemes, can you throw some light on them?

Mr. Vijayan: An assured return scheme can be structured by using a parallel corpus to guarantee returns. Abroad, assured returns schemes are run creatively by using options productively. I think even in India, these schemes will do well once the derivative market takes a concrete shape.

PFN: What is your view on MIPs? Is there a future for such products?

Mr. Vijayan: People are definitely going to require monthly income plans. There are a whole lot of people who want to save for a rainy day and on retirement they would like a steady income stream. These people will have to be catered to. MIPs are here to stay and there will be such products coming out regularly. The difference between an assured income product and a MIP is the structure. An assured income scheme has a parallel corpus to guarantee returns, which is not the case with MIPs.

PFN: Do you think that investors tend to get disappointed if the MIP does not declare dividend?

Mr. Vijayan: Yes, investors definitely feel let down if the fund does not declare dividend. This is because investors tend to confuse it with assured returns schemes of UTI. Here again the distributor plays an important role in conveying this to the investor.

PFN: Coming more specifically to sectoral concerns, what is your view on tech valuations?

Mr. Vijayan: Maybe it’s a little old-fashioned, but I have maintained and even Mahatma Gandhi had said this, India’s strength is in her manpower. By manpower, I don’t necessarily mean labour, I mean brain-power. Our industries must tap this resource, as I believe we are best positioned in this regard. Any sector be it technology, finance, entertainment which thrives on human ingenuity, will be the sector of the future. I have no reason to believe that the technology sector is going through a slump. Some stocks in the sector maybe witnessing a decline, but the leading companies are doing well and there are companies emerging regularly and are doing excellent business.

PFN: How is JM Mutual Fund placed in terms of net assets?

Mr. Vijayan: Currently we are managing Rs 13 bn, and are placed 8th in terms of net assets (as on 31st March 2000).

Our most popular fund is JM Liquid Fund, which did well even in the recent slump in prices of government securities and lost only 6 paisa, which it more than recovered subsequently. The JM High Liquidity Fund and G-Sec Fund are also doing well, as are JM Balanced Fund and JM Basic Fund.

PFN: Some fund managers have resorted to trading. Do you think that is such a healthy thing for the industry?

Mr. Vijayan: There is nothing wrong with it. Every fund has a minimum core portfolio constituting 80% of net assets and does trading in the balance 20%. Trading is against deliveries so there is nothing wrong with that.

PFN: Who are the three people who have influenced you the must?

Mr. Vijayan: The three people whom I admire the most one are: K. G. Wassal (Executive Director, UTI) who is one of the most dynamic personalities I have met, M. Pherwani who was a great manager of people and Chandrababu Naidu who is one of the most effective persons on the political scene today.

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