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Deepak Parekh, Chairman, HDFC
Jul 20, 2018 | Source: CNBC TV18
On volatile markets and timing for the IPO: The Chairman of HDFC said that markets are skittish at the moment and there could be volatility which may not put the emerging markets to be the flavour of the month. However, he mentioned that he’s very confident of the MF industry and the way it has grown over the last 18 months, post demonetization and believes this growth will continue given that other avenues for earning higher returns are very few. like gold, which has gone up by 1% per year for the last 5 years isn’t an appealing opportunity to earn higher returns. Real Estate for rental is no longer an investment opportunity because the yields are 2-3% there. Thus people who purchased real estate to get better returns than Bank FDs have now stopped about 1-2 years back. Besides, banks too have brought down the deposit rates. Thus if one looks at the household savings, disposable incomes are there and are thus wanting higher returns. They also know that India is the fastest growing economy and will continue to grow at 7.5-8% in the next few years whereas global growth is 3.9%.
On Equities under Management as percentage of Market Cap: Equities managed under all MFs in India is very low at 4% of India’s Market Capitalization. In the USA it is 60%, that is MFs own 60% while in all other western countries it is about 30-40%, thus there is huge scope for the MF industry to grow over the long term.
On overall market scenario: The Chairman said, in his 40 years of service, as a group they have never promised any returns. However, he said that their focus is to grow the businesses that they are present in and as a group they see massive opportunities and thus hope to grow. But, there are certain global and external issues which are not in the hands of the company such as oil prices going beyond USD 100, INR to weaken as USD strengthens, trade tensions continue and thus are beyond the control of the company or the government.
On MF Flows: MF Flows in June 2018 at Rs. 8,200 crore are almost half of those that were witnessed by the industry about 6 months ago. Mr. Deepak Parekh said that post demonetization large sums of money came into the MF industry and then it sort of tapered off. However, he mentioned that Net Inflow has been reasonably positive and at times it could be volatile. But, he acknowledges that common man knows that MFs now is a vehicle to and those risk-averse investors choose to invest in Debt or Hybrid Schemes.
On Succession Planning: The Chairman of HDFC Ltd. stated that succession planning is a regular item at the discussions because some of the members are getting old, while all the members have done remarkably well. He says that there are remuneration and nomination committees in all the four companies and the topic is being discussed. For HDFC Bank, he mentioned that they still have a little over two years and thus in about October 2018 the management will form a committee and do a process where they would want the new person to work with Aditya Puri side-by-side for a period of 9-12 months
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