June 28, 2013

Tata Mutual Fund: Will It Regain Its Old Glory?
This is a brief note on the discussion that we had with Ritesh Jain-CIO, Tata Mutual Fund.

by iFAST Research

 Tata Mutual Fund: Will it regain its old glory?

Tata Mutual Fund, one of the oldest fund houses in the industry, is in a consolidation mode this year. The year 2012 saw some high profile exits, which definitely was a cause of concern. However, a new team in place should be able to bring a fresh lease of life into this fund house. Recently there was a change of guard at the Tata stable with Ritesh Jain, the versatile fund manager from Canara Robeco Mutual Fund taking over as Chief Investment Officer. We caught up with Jain to get his views on how the fund management team will be formulating their views to take an exposure into different sectors and companies, the general macroeconomic front and fixed income.

Jain started his conversation by touching upon a subject which has been the topic of discussion among investors and media. Recently some of the funds managed by star fund managers, a nomenclature that we don’t agree with, have been showing a huge volatility in performance which has led to a debate among industry experts on “if a fund manager alone should be held responsible for the performance of a fund”. Jain was of the view that a fund house should have a single view on a particular sector and within that sector different fund managers can take a call on the stocks that they want to include in their portfolios. In short, a synchronization of views of all the fund managers will be the way forward for all the funds managed by Tata Mutual Fund.

On the macro economic front, taking into account the key drivers of the economy, Jain believes that during 2008-2012, there has been a huge increase in consumption while investments witnessed sluggishness. Our trade deficit has also not been in a good shape and the government was just a mute spectator waiting on the sidelines to see what the central bank would be doing instead of bringing about reforms in the economy. All these factors were responsible for the slowdown in the growth momentum. However, he feels that currently we have reached a point where the economy is expected to enter into the growth trajectory. But for that to happen the investment cycle has to start which, in turn, depends on the right strategies and a strong leadership.

As for his fixed income outlook, Jain is of the opinion that the fiscal deficit and the depreciating currency are the two major concerns for the government, while the private sector finds it difficult to borrow as the transmission in rates has not yet happened. Hence, if things have to improve then there should be a policy overhaul in the Indian market. He feels that there is still more steam left at the shorter end of the yield curve and in this context he advised investors to take an exposure into short-term debt funds and dynamic bond funds. According to him the long-term bond funds are no longer attractive and hence investors should book profits and start taking exposure into the equities market.

During the course of the discussion Jain was joined by his equity fund management team to give an outlook on the equity market. The fund management team is bullish on the Banking, Financial Services and Insurance (BFSI) space and here their focus is on private sector banks and high quality Non-Bank Financial Companies (NBFCs).The team does not have a positive view on public sector banks as they believe that these banks are reeling under tremendous pressure on account of increasing cost structures and frequent changes in management. The overweight sectors are Pharma , IT, Auto and Auto Ancillary while Oil & Gas, Metals and Materials are the unfavorable sectors for this team. Finally Jain concluded this discussion on a positive note by saying that the economy is expected to bounce back at any time and hence investors should start taking an exposure into large- and mid-cap funds instead of sitting on the fence.

Our Take

We at believe that Tata Mutual Fund will be able to regain its past glory with a vibrant team in place under the stewardship of Ritesh Jain.We have always been positive on some of their innovative launches like Tata Ethical Fund and Tata Retirement Savings Fund and are of the belief that a more concentrated effort should see the fund house sail through these difficult times.



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