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Mutual Fund Summit Live: India needs a vibrant corporate bond market’, says Edelweiss MF’s Radhika Gupta on debt investments
Radhika Gupta, MD & CEO of Edelweiss Mutual Fund, highlighted the importance of mutual funds and a strong corporate bond market as India works towards becoming a developed economy.
“It is also fantastic to hear CBDT chairman talk about the importance of the industry in the context of Vikisit Bharat and how widely MF as a product is being used from doctors to engineers to armed forces,” Gupta said.
She said a developing economy needs a strong corporate bond market across different credit segments.
“One is any developing economy needs a vibrant corporate bond market, and it needs a vibrant AAA market. It needs a vibrant AA market. It needs a vibrant junk bond market. So I think as we think towards Viksit Bharat, I think it needs a vibrant corporate bond market,” Gupta said.
Gupta said mutual funds and debt ETFs can provide liquidity and support the development of the debt market, while household asset allocation should also include investments beyond equities.
“Mutual funds are investors who also provide liquidity. So when you have an active debt mutual fund ecosystem, when you have an active debt ETF ecosystem, a lot of other things start to go. The second is that I think as India develops, from a consumer point of view, the consumer asset allocation has to be more than equity.
“So any tax policy and any policy, I think, needs to look at both. Now, if we were to look at what you mentioned, which is individual bond platforms coming up, retail GSEC trading is happening. There are some bond platforms offering bundles of products. I think many things can coexist,” she said.
Gupta also cautioned that retail investors may have limited understanding of individual bonds compared with equities.
“I think what we must remember, however, is that if a retail investor’s knowledge of equity is limited, then knowledge of individual bonds is even more limited. Most people, I would guess, struggle to impa understand the impact of duration when debt markets move up and down,” Gupta said.
She said mutual funds could play a similar role in debt investments as they have done in equities.
“Mutual funds are a common pooling vehicle. They’ve been very successful in equity. There’s no reason they can’t be in debt,” Gupta said.