=> Welcome to the live chat session at
[04:28:38 PM] => Myiris:
Mr. Sandesh Kirkire, Head – Debt Funds, Kotak Mahindra Mutual
Fund will be joining us shortly
[04:28:54 PM] => DISCLAIMER
[04:29:13 PM] => Mr.
Sandesh Kirkire is the Head – Debt Funds, Kotak Mahindra Mutual
Fund. At the time of this conversation / chat, Mr. Kirkire
may or may not have positions in the stocks mentioned below,
although holdings may change at any time.
[04:29:59 PM] => The
views expressed by Mr. Kirkire is based upon information that
he considers reliable, but does not represent that it is accurate
or complete, and it should not be relied upon as such. Mr.
Kirkire, his company and its affiliates, officers, directors,
partners, and employees may, from time to time, have long
or short positions in, buy or sell and deal as principal in
the securities, or derivatives thereof, of companies mentioned
herein and may take positions inconsistent with the views
expressed. None of the information contained herein constitutes,
or is intended to constitute a recommendation of any particular
security or trading strategy or a determination that any security
or trading strategy is suitable for any specific person. To
the extent any of the information contained herein may be
deemed to be investment advice, such information is impersonal
and not tailored to the investment needs of any specific person.
You should consult with and rely upon your own advisors whether
and how to use such information in making any investment decision.
[04:30:24 PM] => Lastly
the views expressed by Mr. Kirkire have no bearing whatsoever
with that of IRIS Ltd. IRIS does not guarantee the accuracy,
adequacy or completeness of any information and is not responsible
for any errors or omissions or for the results obtained from
the use of such information. IRIS especially states that it
has no financial liability whatsoever to any user on account
of the use of information provided on its website www.myiris.com.
[04:32:46 PM] => Myiris
: Welcome to the chat session, Mr. Kirkire.
[04:33:57 PM] => Ashish Mehra
: As the subject says do u expect the high inflows to continue?
[04:35:25 PM] => SK
: The high inflows were on two counts viz. softening of interest
rates and non-availability of any other investment avenue.
With the Bank deposit rates coming down across the board,
the investor would certainly have to consider the income fund
option going forward.
[04:35:57 PM] => Vishal Soni :
Sir, Do you think is this the time to enter the secondary
market via mutual fund and directly investing in market?
[04:37:00 PM] => SK
: The mutual fund is an ideal vehicle for investment in both
debt and equity products. As for equity, with different portfolios
available for you to choose from a part of your savings could
certainly be put into the equity schemes. As regards the debt
funds, with a lack of retail secondary market, it would make
sense to consider investment in debt securities through the
debt fund route.
[04:39:50 PM] => Jain Divyak :
Bond fund or gilt fund should be preferred for a 3 month investment
[04:40:44 PM] => SK
: For a 3-month horizon you should consider the short dated
gilt funds which have normally outperformed the liquid funds.
A typical bond fund or a long dated gilt fund should be considered
for investment horizons above 6 months.
[04:41:39 PM] => Shiladitya :
What returns I can expect in the next 1 to 1.5 years in Debt
funds. Can I expect at least 10%?
[04:42:16 PM] => SK
: With interest rates having coming down over the last one
year the returns generated by the funds over the last one
year have been in the 14% - 15% range. Going forward although
the interest rates could remain stable, the return expectations
have been scaled down to 8% to 10% range.
[04:43:02 PM] => Neeraj : Can
debt funds maintain the same momentum as of last year?
[04:44:03 PM] => SK
: Unlikely as going forward the extent of interest rate drop
would not be as high as what was seen over the last year.
The returns, therefore from the funds would be lower.
[04:44:43 PM] => Godhwani : Where
do you see the interest rates in the coming quarters?
[04:45:10 PM] => SK
: We expect the interest rates to remain stable in the coming
[04:46:02 PM] => Amit : When do
you see the reversal in the US economic slowdown happening?
[04:46:59 PM] => SK
: The US home loan mortgage market has shown some improvement
over the last quarter. However a significant turnaround could
be expected in the first quarter of the next calendar year.
[04:47:42 PM] => Sudhakar : Do
you think second-rung IT stocks will survive now?
[04:48:32 PM] => SK
: They would survive, however their growth would not be as
significant as seen in the last year with the valuation spreads
between the top rung IT companies and the second rung IT companies
[04:48:54 PM] => Manish Agrawal
: Is this a good time to get into debt?
[04:51:35 PM] => SK
: Any time is good time for getting into the debt funds. What
is critical is the entry into the debt schemes should be based
on the investment horizon. The income funds are suitable for
an investment horizon above 6 months while the long dated
gilt schemes are suitable for investment horizons above 1
year. For short dated investments below 6 months you should
ideally look at the short dated gilt schemes, K-gilt Savings
Plan of ours, which would normally give returns better than
the liquid schemes for periods of 3 months and above.
[04:52:17 PM] => Vineet : What
factors can be attributed to high inflows into debt schemes
in the current year?
[04:52:55 PM] => SK
: The softening of interest rates and overall reduction in
interest rates in the economy. The removal of badla also had
a positive impact on the inflows into the debt schemes.
[04:53:12 PM] => Raghu : Whats
been the impact of UTI fiasco on Kotak Mahindra in particular
and Private MFs in general?
[04:54:47 PM] => SK
: The impact has been generally positive. The transparency
brought about by the Private MFs as also the quality of the
portfolios has seen more money come into the Private MFs.
[04:55:20 PM] => Madhav : Is there
anything SEBI can do to prevent scams like UTI ? How strict
should they be regarding Mutual Fund guidelines?
[04:57:05 PM] => SK
: I think the UTI problem was mainly on account of not respecting
the concept of NAV. Finally any mutual fund is a body of investors.
Everyday there is someone coming into the funds, somebody
is already sitting in the fund and someone is exiting from
the fund. What is critical is to ensure that all these entries
and exits happen at the Nav. This is the only way you could
be fair to all the investors.
[04:59:28 PM] => Karan : Do you
believe in constant churning of the portfolio or do you follow
a buy-and-hold strategy?
[05:01:49 PM] => SK
: We do not churn our portfolio continuously. We believe that
this does not add to the fund returns significantly. Based
on the interest rate view and the market conditions we position
our portfolio across the yield curve.
[05:02:14 PM] => Dinesh : Can
you tell us something about your portfolio allocation?
[05:03:18 PM] => SK
: Each scheme portfolio is constructed based on the scheme
objective. We have a liquid scheme where we invest at the
shorter end of the yield curve; mainly into the money market
securities. We then have K-Gilt Savings Plan where we invest
in the government securities at the shorter end capping the
average portfolio maturity to 2 years.
[05:03:46 PM] => As
for the K-Gilt Investment Plan, we exclusively invest in government
securities, the maturity duration of which depends upon our
interest rate view and the prevailing market conditions. The
investments in K-Gilt Investment Plan are normally at the
medium to the longer end of the yield curve.
[05:04:50 PM] => In
our Income Scheme, K-Bond, we have a mix of investments in
corporate bonds and government securities. Normally we have
about 30% to 40% of the K-Bond corpus invested in the Government
securities with the balance in corporate securities. Generally
we invest at the short to medium end (up to 5 years) in corporate
securities while medium to long end in the government securities.
[05:05:12 PM] => Sreenivas : Do
you plan to launch any new schemes in the near future?
[05:05:44 PM] => SK
: We have certain schemes at the drawing board stage. We should
be able to come out with info on them by the end of the quarter.
[05:06:36 PM] => Ajith kota :
Whether investors should invest in gilt fund or income fund
in the current scenario?
[05:08:15 PM] => SK
: The investment in the gilt fund or the income fund should
be done based on the investment horizon. For very short investment
horizon we offer our K-Liquid scheme. For investment horizons
up to 6 months we offer out K-Gilt Scheme. The K-Bond scheme
is ideal for investment horizon above 6 months while the K-Gilt
Investment Plan is ideal for investment horizons above 1 year.
[05:10:46 PM] => bhavik_7 : In
the past 6 months, there has been a rally in the debt markets
because of excess liquidity due to low credit pickup and increase
in deposits. Also lack of interest in stock markets led to
increase of investment in debt papers. Do you think this is
a healthy liquidity? Would this continue as the government
borrowings will overshoot targets and recession will create
slow money supply growth?
[05:12:15 PM] => SK
: With the economy growing at a very slow pace, the Central
bank continues to have an easy money policy reflected in the
large liquidity overhang. The government expenditure is also
on the rise while the topline revenue growth of the government
has been actually negative. We believe that this excess spending
could lead to some pickup in the economic activity albeit
with a lag.
[05:12:47 PM] => The
13th year of good monsoon would also help in the economic
recovery. The external front, both the interest rates in the
US as also the international oil prices continue to be positive
for the domestic interest rates. We therefore believe that
the interest rates would continue to be stable with a bias
[05:13:38 PM] => blanche : Don't
you think that the current soft interest rates are artificial
in nature - do we fundamentally deserve them. Secondly are
you expecting a run on the rupee - how lonf before we break
the 47.30 barrier and head towards 48.50 - 50 and likely impact
of the volatility on debt MF's NAVs.
[05:15:59 PM] => SK
: The current soft interest rates are mainly on account of
a lack of credit pick up and hence demand for money by the
corporates. If you look at it at the macro level, with close
to 10% of fiscal deficit after considering the mess in the
state finances as also the huge NPA in the financial system,
a softer interest rate scenario does not look right at present
for the economy.
[05:16:30 PM] => However
when you consider the fact that as an economy, we believe,
that we have created overcapacities in the manufacturing sector
while we continue to lag on the infrastructure end; it is
therefore necessary for the country to have this soft interest
rate stand for some more. In fact the Government should use
this time to do its bit on the divestment front as also do
a cleanup act on the State finances and the banking sector.
[05:17:08 PM] => Surely
you could not do this keeping the interest rates high. With
the dollar weakening, the rupee seems to have moved out of
the overvaluation zone. However with more signs of the US
revival, we could see the US$ bounce back in the coming months.
However in the near term we do not believe that the rupee
dollar movement should impact the money markets and hence
the MF NAVs.
[05:19:50 PM] => MKU : How long
do you think the rally in bond markets continue?
[05:20:48 PM] => SK
: We think the interest rates would continue to be stable
with a softening bias for some more time. Even within the
yield curve there are many yield gaps and the market would
continue to trade around these yield gaps.
[05:21:10 PM] => the_entrepreneur
: What is the reason that certain debt funds are giving 20%
plus returns at the moment?
[05:21:56 PM] => SK
: The high returns have mainly on account of drop in the interest
rates. Going forward the returns from the debt funds are expected
to be scaled down.
[05:23:07 PM] => pankaj_jawanjal
: Will there be fed rate cut tomorrow? If yes then will RBI
[05:24:07 PM] => SK
: The market is expecting at least a 0.25% cut in the Fed
rates. The liquidity in the market continues to be very high.
The RBI may not immediately follow up with a rate cut over
[05:24:19 PM] => Sudarshan : What
is your outlook on the present situation in Indian debt market?
[05:25:08 PM] => SK
: The debt markets have grown in leaps and bounds over the
past 2-3 years. Mainly on account of addition of new market
players like the Primary Dealers and the Mutual Funds. The
last Credit Policy has made it mandatory for Banks and Primary
dealers to invest only in dematerialized debt beginning October
[05:25:27 PM] => The
activity level in the corporate debt market is therefore expected
to increase manifold in the coming year. Our interest rate
outlook continues to be positive on the back of a liquidity
flush banking system, and the stated objective of the Central
Bank to provide the market with sufficient liquidity as and
when needed. We believe the next two years should see a lot
of financial reforms being undertaken by the government, which
can be effectively done on the backdrop of a stable interest
[05:26:12 PM] => Arun Poorswani
: Is this the right time to start buying equity mutual funds?
[05:26:52 PM] => SK
: Yes, I believe that a portion of your savings should find
a way into the stock markets now.
[05:27:56 PM] => Shankar : Do
you think unit-64 scheme will be investing more in debt?
[05:30:23 PM] => SK
: The US64 scheme was actually positioned as an income scheme
giving regular income to its investors. Such scheme ought
to invest a predominant portion of its portfolio into debt
than in equity. Going forward the scheme should get restructured
with an allocation towards debt.
[05:32:32 PM] => Narayanan : What
is the return expected under the debt funds in next 1 year?
[05:34:40 PM] => SK
: We believe that most of the debt funds should generate returns
in the 8% to 10% in the next 1-year.
[05:44:29 PM] => Sorry for the
[05:45:03 PM] => We'll be continuing
the chat shortly
[05:51:16 PM] => jnimish123 :
I hold debt schemes worth Rs 2 Lakh. During last one year
my portfolio appreciated by 19%. I am a retired government
employee. Should I stay invested?
[05:51:38 PM] => SK
: I think your decision to stay invested should be driven
by your investment horizon going forward. In case the investment
horizon going forward is more than 6 months / 1 year you should
continue to stay invested in the debt schemes.
[05:52:34 PM] => In
case your investment horizon going forward is less than 6
months then you could consider investing in the short dated
gilt schemes or liquid schemes.
[05:52:44 PM] => Sheshadri : What's
your outlook for the market going forward?
[05:53:33 PM] => SK
: We believe that the interest rates would remain stable in
the immediate future.
[05:54:36 PM] => jnimish123 :
I read in news papers that schemes that gave higher returns
are actually riskier. Is that true?
[05:55:01 PM] => SK
: I do not think so. You need to look at the schemes in specific.
[05:56:07 PM] => Lalit Khanna
: What do you think the most successful fund managers have
[05:58:01 PM] => SK
: An ability to correct their own view vis-à-vis the market-happening.
[05:59:53 PM] => jnimish123 :
As you mentioned interest rates are not going to decline further.
Under what circumstances can the return fall below that from
time deposits in bank?
[06:01:40 PM] => SK
: I do not think so. As both the Banks and the funds are finally
going to vie for the same asset class. Finally the total cost
that the debt funds charge are in the region of around 1.50%
to 1.75% which are anyway lower than the hidden cost that
a depositor bears while investing in bank deposits.
[06:03:19 PM] => jnimish123 :
How do you rank the options like index based equity fund,
[06:04:50 PM] => SK
: The index based equity fund is in a separate class vis-à-vis
the other two options. As mentioned earlier in our view it
makes sense to allocate a part of your funds into equity at
this stage, an index based equity fund could be an option.
As regards the gilt funds and the bank deposits, the return
that you get from a gilt fund is either in the form of a capital
gain or dividend; both these streams of option are superior
to the interest income that you would receive from bank deposits.
[06:06:16 PM] => n.narayanan :
What is the future of mutual fund industry in India?
[06:07:44 PM] => SK
: Great. Mind you against Rs.10 lakh crores in bank deposits
the assets under the MF industry are close to Rs.1 lakh crores;
the MF assets are therefore about 10% of the banking deposits.
This figure is much higher in the developed markets.
[06:10:48 PM] => abi_100 : Do
you expect the fed to cut the interest rate tomorrow given
the weakness in dollar?
[06:11:22 PM] => SK
: We expect at least a cut of 0.25% in the fed rates tomorrow.
[06:22:40 PM] => randev : How
is the liquidity position in the medium term gilts?
[06:23:07 PM] => SK
: The market is fairly liquid at the medium term 2004 -2006
[06:23:38 PM] => Sachin : What
kind of returns can one expect one year hence. Can one expect
same returns as last year?
[06:24:09 PM] => SK
: The returns over the last year have mainly on account of
the fall in interest rates. We have seen the yield of a 10-year
government security fall by more than 2.25% over the last
one year. Such steep fall is not expected going forward. The
returns therefore from the debt funds on a one-year horizon
are expected to be in the 8% to 10% range.
[06:24:41 PM] => Narayanan : Don’t
you think the private sector funds are concentrating on corporate
business rather than retail which is contrary to what the
role of mutual fund is expected to do?
[06:24:57 PM] => SK
: It takes time to build the retail side of the business.
It is also very expensive. The fund movement across the non-metros
also takes time. We on our side have realized the importance
of the retail investors. We are now servicing our investors
from about 30 cities across the country.
[06:25:37 PM] => Sachin : Any
negative/fall in the debt funds NAV expected in the short
[06:26:09 PM] => SK
: The NAVs of the funds may go up or down depending upon the
market sentiments on account of the marked to market of the
assets. It is therefore have a disciplined approach in investing
in different schemes depending upon the investment horizon.
[06:26:54 PM] => Sachin : Any
remote possibilities of a 12 - 13% return in the coming year?
If at all what could trigger it off?
[06:27:35 PM] => SK
: That kind of return could happen in case the interest rates
further come down by about 1.50% to 2% in the next one year.
This could be triggered by high capital inflows into the country
on account of positive initiatives on the disinvestments front
by the government as also policy initiatives, akin to what
we saw in the cellular telephone industry, in the other infrastructure
sectors. The other triggers would be finally the government
showing the political will to clean up the mess in the state
[06:28:06 PM] => Makroni : How
do you view the downgrading by S&P and Moody’s on the investment
[06:28:31 PM] => SK
: The concerns shown by both the S&P and the Moody’s are for
real. However we have neen much impact on the markets as our
dependence on the external debt is not very high.
[06:29:05 PM] => Sachin : Any
MIP in the offing?
[06:29:33 PM] => SK
: Our K-Gilt Savings Plan distributes dividend on a monthly
basis and it has not missed the dividend even once over its
life since December 98.
[06:29:47 PM] => Karan : Given
the fact that all Debt funds have given >18% returns over
the last 6 months and the NAVs are at there peak, should a
small investor disinvest now and invest later after the NAVs
[06:30:13 PM] => SK
: I think we need to understand that the debt schemes are
different from the equity market. Finally what do you do with
the money that you get from the redemption from the debt schemes?
In all probability you would invest either in the bank deposits
or the liquid funds. This is not really the solution.
[06:30:39 PM] => What
you need to ask yourself is what is your investment horizon
going forward from today. In case that investment horizon
is above 6 month/ 1 year you may stay invested in the debt
scheme. In case you have a shorter investment horizon say
6 months you could look at the short dated gilt plans or the
[06:30:57 PM] => Arjun Kakar :
Why is it that GILT funds give higher returns then INCOME
funds even though they invest in more secure govt. paper as
compared to corporate paper?
[06:31:15 PM] => SK
: The gilt funds have given better returns than the bond schemes
mainly because the gilt schemes could invest at the longer
end of the yield curve vis-à-vis the bond schemes. The corporate
bond market is not active at the longer end; normally the
maximum maturity in the corporate bond market is 5 years while
the maturity of actively traded gilts have been above 10 years.
[06:31:35 PM] => Thus
when the interest rates fell the long dated bonds rose more
in value than the short dated bonds generating higher return
for long dated gilt schemes than the Income schemes.
[06:32:13 PM] => SK : Thank you
all for your keen participation in this chat
[06:33:03 PM] => Myiris : We thank
Mr. Sandesh Kirkire for taking time out to answer investor's
[06:33:25 PM] => Myiris : Thats
all we have time for in today's event
[06:35:47 PM] => Myiris : Coming
up next on myiris chat masala, Mr. Jayesh Patel (Head Research
- LKP Shares & Securities Ltd.) on Friday, 24th August
[06:36:18 PM] => Myiris : Thank
you once again and good bye for now !!