Mr. Binay Chandgothia is the head of fixed income at IDBI-PRINCIPAL Asset Management Company Limited. Binay holds a Diploma in Business Management from XIM, Bhubaneshwar and he is a Commerce graduate from St. Xavier's College Calcutta.

Prior to joining IDBI-PRINCIPAL, Binay was with SBI Mutual Fund, where he managed fixed income funds (regular income, cash and monthly income). He has more than 7 years experience in investment management, of which 5 were with State Bank Of India, Treasury - the largest treasury in the country with an asset size of INR 550 bn. At SBI, he was instrumental in operationalising and running the sovereign trading desk of SBI. His other responsibilities included dealing in money market instruments and corporate bonds.

In an interview to Personalfn, Binay gave his take on the economic turnaround, the domestic interest rate scenario, performance of gilt funds and his expectations from the upcoming Union Budget.

PFN: What is your view on the domestic economy? When do you see a turnaround happening?

Mr Chandgothia : There are some initial signs of a turnaround if one goes by figures coming out of cement, autos and may even be steel. However, it’s still early days and one would have to wait for data in the coming quarter before it can be said that a turnaround is definitely on. We’d expect the turnaround story to gain credence going into the 2nd quarter of this calendar year.

PFN: Going forward where do you see interest rates heading?

Mr Chandgothia : The 10-yr has already dropped to around 7.25%, on expectations of a cut in small savings rate/RBI repo rate. The expectations are not entirely unfounded as there is a definite case for a cut in administered interest rates, given abundant liquidity and a fall in average inflation from 6-8% average to 3-5% average. On that basis, we’d expect the 10-yr interest rates to stabilize between 7-8%, unless some really radical steps are taken by the powers that are.

PFN: Last year saw a huge rally in government securities. A lot of investors expect this to continue, which is a little unrealistic. Are you still advising investors to buy these funds?

Mr Chandgothia : People who buy gilt funds (long term) should understand the interest rate risks that such funds carry. Once that is done, there is no reason why they should not invest.

PFN: What sops are you expecting from this budget with respect to mutual funds in general and debt funds in particular?

Mr Chandgothia : We do not expect to see any major changes in capital gains/dividend distribution tax on mutual funds. However, there could be derived benefits for the industry is some active steps are taken on small savings, pension reforms etc.

PFN: Pension funds is the next big product waiting to hit the industry. What in your view will be the impact of this development?

Mr Chandgothia : Very positive for all segments of the market. For investors, it would give them a chance to get market related returns and benefit from portfolio diversification and active management. For the manufacturers of pension products, it would create a long-term corpus of investment assets.

PFN: IDBI-PRINCIPAL Income Fund has been ranked highly vis-à-vis its peers. What has been your fund management strategy?

Mr Chandgothia : The fund has always followed a policy of optimizing returns by adopting the right portfolio mix. Our strategy, our credit screening process and constant portfolio monitoring has enabled us to perform well so far. We hope to continue to do well and try and meet the expectations that our stakeholders have from us.

PFN: What is your advice to the mutual fund investor where income/gilt funds are concerned?

Mr Chandgothia : There are a multitude of products available. Buy funds if they meet your investment objective (i.e. I would not recommend an Income Fund to a person if his investment horizon is 10-15 days). Once the generic product has been identified, one should look at specifics like quality of performance, the fund managers’ credibility, track record, the strength of the product manufacturer etc. before deciding on the specific fund.

PFN: Who are the three persons you admire the most?

Mr Chandgothia : Not necessarily in the same order - Sachin Tendulkar (success at such a young age hasn’t changed him a bit) Amitabh Bachchan (he’s shown character at the most trying of times) Jyoti, my wife

PFN: What books do you like to read?

Mr Chandgothia : Honestly, don’t get time to read a lot of them though I used to read a bit of fiction, financial history some time back. Given time, I’d like to re-read history in detail once again.

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