'Short term nature of foreign investors a concern' says Sundaram’s T P Raman

Proposal to allow foreign investors to invest in Indian mutual funds will increase AUM volatility, says Sundaram’s Raman

Mumbai: T P Raman, Managing Director, Sundaram Mutual Fund, the proposal in the 2011-12 budget to allow foreign investors to directly invest in mutual fund schemes will lead to volatile flows. Here are Raman’s views:

Implications for the equity market

The manufacturing and the consumption sectors need to be rerated. I think it will be good for two reasons: a) there are no implied negatives in the budget and b) quite a few positive measures have been proposed.

Will equity funds be more attractive?

I don’t quite see that directly. May be indirectly it might do this.

Implications for the mutual fund industry

We can expect mutual fund AUMs to see a lot of volatility because of the move to allow foreign investors direct access to mutual funds. FIIs by definition are not long term. Fund managers may have issues with handling “hot” moneys. The positive is that the MF sector will get some depth because of this move.