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70% of SIP flows coming into our mid, smallcap funds: Sunil Subramaniam

Since the correction is sentimental in nature, I am consistently buying stocks in this downfall.

ET Now|
Aug 23, 2019, 05.54 PM IST
Sunil Subramaniam-Sundaram MF-1200
The industry has also done a good job of marketing the fact that in times of stock market correction, all SIP instalments are going to be the multibagger SIP instalments which will get you value, says Sunil Subramaniam, MD & CEO, Sundaram Mutual. Excepts from an interview with ET NOW.

We understand you have just come back after a tour of the entire country marketing a new NFO. What did you picking on ground? What is driving people or what is assuring them that they are not discontinuing the SIP so far?
It is the confidence in Mr Modi. Ultimately, at the ground level, consumers are confident about India and there is a lot of trust in Modi and the government. Coming to the recent stock market correction, while advisers and distributors are a little bit concerned because they do not know how to face their customers with a negative SIP, at the ground customer level, they are not so much worried. Yes definitely, they are concerned but I think they see that the future. The industry has also done a good job of marketing the fact that in times of stock market correction, all those SIP instalments are actually going to be the multibagger SIP instalments which will get you value.

While some amount of credit should be given to the industry for proper communication in terms of the SIP as a product, the rupee cost averaging benefit and ultimately the political result showed that people trust Mr Modi. There was naturally a spillover in terms of what they do with the financial actions. What customers are not doing is that because they are saving, they are not spending. Also a point is would the customer spend the money because that will have a multiplier effect on the economy or save it and give it?

At the cost of being selfish and the industry on wanting more flows the fact is that capital creation you know true capital creation will happen when a consumer spends. The American economy is consumption driven economy.

How have the flows have been lately in your small and midcap funds? Now you are a full-fledged house with all kinds of funds but there was a time when big reputation was made because of your outstanding work in small and midcaps as a house which continues to remain the favourite for the investors, How has it been because that sections has been the largest hit in the market?
Yes, but about 70% of our SIP flows are coming into our midcap and smallcap funds. This time I am actually buying and I think that could be the best for SIP investors, a proof that I am not facing a huge redemption pressure but I am actually getting fresh cash into my fund and am in a position to buy the right quality stocks.

So for me, this correction, since it is not driven by the actual fundamental outlook of these companies but driven by the sentimental approach, is actually a big buying opportunity and I am consistently buying stocks in this downfall.

How many quarters more before a lower cost of borrowing starts impacting and triggering economic growth?
There are two inflection points here; one is the domestic inflection point and second is the international inflection point. In about three quarters, you will see the domestic inflection point starting because this festival season -- combined with the news of a better monsoon -- will help clear most of the auto stock pileup and with bank transmission that will also help create a situation where all the pains have been absorbed domestically and fresh buying has started.

At the same time, India is not isolated from the world. While among the emerging markets, we are the ones having most domestic economy support from the outside world that is America, Europe -- you need them to buy things from India -- that is our export industry. The inflection would probably come closer to the last quarter of next year because Mr Trump’s actions are largely driven by his desire to ensure his re-election. So the December 2020 election will be an inflection point for the world because I see a more inclusive, more interdependent America because that is a natural economic order of the world.

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