[04:29:26 PM] => Welcome to the live chat session, Mr. Surti will be joining us shortly
[04:30:27 PM] => DISCLAIMER:
[04:31:07 PM] => Mr. Nandkumar Surti is the Head - Fixed Income, JM Mutual Fund. At the time of this conversation / chat, Mr. Surti may or may not have positions in the stocks mentioned below, although holdings may change at any time. The views expressed by Mr. Nandkumar Surti 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. Surti, 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.
[04:31:29 PM] => 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.
[04:32:07 PM] => Lastly the views expressed by Mr. Surti 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.
[04:36:35 PM] => Welcome to the chat session Mr. Surti

[04:37:32 PM] => Santosh: What are the reasons for sudden large inflows into Income funds? Do you think sufficient investment avenues are available for investing the incremental inflows?
[04:38:46 PM] => NS: The demise of badla, attractive returns, safety and liquidity of fixed income mutual funds compared to alternate avenues of investment like bank deposits, corporate debentures, fixed deposits etc. have resulted in good inflows into fixed income mutual funds. The depth in the corporate bond market is gradually improving.
[04:39:44 PM] => While there is a dearth in the availability of good quality paper at this point of time, over a period of time as the trading in lower rated (AA / AA+) corporate improves the problem may gradually resolve. At this point of time there is a definite dearth in the availability of good quality corporate paper.

[04:41:22 PM] => Neyha: It is assumed that large amount of corporate money that exited US 64 has entered debt and income funds of private mutual funds. Is it true?
[04:41:54 PM] => NS: Some of the money is definitely coming. But it is difficult to quantify.
[04:43:32 PM] => Renuka: Your exposure to IDBI debt paper is 25 crores. IDBI has been downgraded by Crisil.

[04:44:03 PM] => a) Do you think the downgrade is justified considering idbi has government backing
[04:44:27 PM] => b) Since your exposure to idbi debt is high what steps have you taken to ensure your fund will not be hit?
[04:45:12 PM] => NS: Government backing or not � a company has to be rated on its stand alone performance and cashflows (unless it�s a structured obligation).
[04:46:27 PM] => We have exposure only to short term IDBI paper due to mature before 6 months and are fully marked to market. As such we have not been affected by the downgrade.

[04:47:30 PM] => Alpana: What kind of returns can investors expect while investing in your debt fund in current market conditions?
[04:48:24 PM] => NS:We are prohibited by SEBI to indicate any returns. You may get intouch with your consultant for the same.

[04:49:06 PM] => Jitesh: What is your outlook on YTMs in the debt market? Will the downward trend continue for some more time?
[04:49:48 PM] => NS:The YTM in both the Gilt and corporate market are at historical low levels. The market is mainly driven by liquidity at this point of time. We expect the liquidity to be comfortable over the next 3 months and expect stable interest rate conditions. However, one has to keep a close watch on forex volatility, credit offtake, overall liquidity etc to monitor rate movements closely.

[04:51:43 PM] => Abhay: Some fund managers say that interest rates are headed southwards, one can expect cut in bank rate but Y.V. Reddy clearly said that there is not much scope to bring down rate of interest and there is a limit to what interest rate cut on their own can do. So whom should we believe -Rbi which is the authority to cut interest rate or the so called market educated fund managers?
[04:54:04 PM] => NS: The YTM in both the Gilt and corporate market are at historical low levels. The market is mainly driven by liquidity at this point of time. We expect the liquidity to be comfortable over the next 3 months and expect stable interest rate conditions. However, one has to keep a close watch on forex volatility, credit offtake, overall liquidity etc to monitor rate movements closely. Each fund managers perspective on rate movements is closely reflected in the duration of portfolio they maintain. Further fund managers also give justification for their view. Without rate cuts also the general level of interest rate is at historical low.

[04:55:25 PM] => Rajas: There are market rumours that primary dealers have gone whole hog into punting in Gsecs in the belief that they can call right and book capital appreciation. Would this not aggravate their asset liability mismatch?
[04:57:26 PM] => NS: We think all the PDs have strong asset liability management system in place and are also subject to rigorous internal controls (particularly viewed in relation to the sharply volatility over the last 2 years). Any decision would be a consensus decision.

[04:58:08 PM] => Keswani: Which is the most liquid segment in the gsec market? What determines the liquidity of any particular Gsec?
[05:01:26 PM] => NS: There is no particular liquid or illiquid segment. When there is an apprehension that interest rate are likely to rise, the concentration is at the shorter end of the market (because of higher loss at the long end of the segment if interest rates rise) and while if interest rates are expected to drop there would be more trading interest at the long end where trading profits would be maximum.
[05:02:08 PM] => NS: There is no particular liquid or illiquid segment. When there is an apprehension that interest rate are likely to rise, the concentration is at the shorter end of the market (because of higher loss at the long end of the segment if interest rates rise) and while if interest rates are expected to drop there would be more trading interest at the long end where trading profits would be maximum.

[05:05:07 PM] => Mathew: The rbi governor expects a turnaround in oct? When do you think will the economy revive?
[05:05:25 PM] => NS: There are no definite signs of a revival at the moment. We would move with global trend for some time atleast.

[05:06:29 PM] => Kamesh: Where do you think interest rates are headed ?
[05:13:00 PM] => NS: The YTM in both the Gilt and corporate market are at historical low levels. The market is mainly driven by liquidity at this point of time. We expect the liquidity to be comfortable over the next 3 months and expect stable interest rate conditions.
[05:16:35 PM] => NS: Buy and hold to a large extent unless we change our outlook on the interest rate scenario.

[05:16:50 PM] => Rudi: Sir, the fed is meeting on August 21.How much point rate cut do you expect? How long can the fed keep cutting rates? Do you think inDia will cut interest rates after the fed decision?
[05:17:11 PM] => NS: A rate cut seems on the card given the economic data. Atleast 0.25%. We do not see the same impacting the Indian interest rates.

[05:18:47 PM] => Bhaskar: Sir, real interest rates are about the lowest in a decade. Are these rates sustainable over the longer term?
[05:19:25 PM] => NS: In the long term factors like FDI (quantum and sustainability), FII inflows, trade performance (and as such forex inflows), structural changes in the banking system (efficiency) would determine the level of interest rates.
[05:20:56 PM] => NS: Safety, Liquidity, Absolute returns, risk adjusted returns, NPAs, Quality of portfolio, level of transparency, track record etc.

[05:24:08 PM] => Snowdrop: Debt is alive and kicking but isn't it because of corporate money. Retail participation is anyhow low. Do you agree?
[05:25:49 PM] => NS: Retail participation is definitely fast improving. Almost all private sector mutual funds have started attracting retail money with better performance and improved service level.
[05:26:32 PM] => goa403510: Please send me details of your fund.

[05:26:55 PM] => NS: Please email your address at [email protected].
[05:27:27 PM] => smalay_2000: Is it right time to enter into the market for short term trading?
[05:27:55 PM] => NS: Any outlook which is short term is open to risk. We would not advise.

[05:28:37 PM] => Shilpa Jain: A Fixed income MF is viewed as an alternative to a bank deposit. With this low interest rate regime the debt funds are able to give better returns than bank , but in future will this kind of returns continue ? if no why will investors should invest in income funds than bank deposit?
[05:29:52 PM] => NS: Given the current structures we expect fixed income mutual funds to continue with their outperformance. Safety and liquidity of fixed income mutual funds compared to alternate avenues of investment like bank deposits, corporate debentures, fixed deposits etc is expected to continue.

[05:30:06 PM] => Amol: Sir does the US-64 fiasco signal the end of assured return scheme?
[05:30:52 PM] => NS: Not necessarily. US 64 was not an assured income scheme anyway.

[05:31:29 PM] => Hima: How can we ever trust MFs again when big daddy UTI can default. Sir what impact do you think will this have on the rest of the mf industry?
[05:31:59 PM] => NS: We do not see any adverse impact on the industry as a whole. The industry would continue to thrive. Though temporarily the investment climate is bound to be affected.

[05:33:01 PM] => ayan : What steps have you taken to reassure investors that you are different from UTI?
[05:34:33 PM] => NS: Transparency, track record of performance, high standards of service would speak for itself.

[05:35:41 PM] => Nimeshi: Where do you see interest rates in the next quarter?
[05:36:27 PM] => NS: The YTM in both the Gilt and corporate market are at historical low levels. The market is mainly driven by liquidity at this point of time. We expect the liquidity to be comfortable over the next 3 months and expect stable interest rate conditions.

[05:38:15 PM] => Kavita: The remedy suggested by UTI is worse than the disease itself. It perpetuates the image of us 64 as a fail-safe investment instead of making investors realize that us 64 is just like any mutual fund where there can be no assured returns.
[05:38:36 PM] => NS: Can�t comment on a competing mutual fund.

[05:39:17 PM] => Shilpa Jain: Why would people invest in debt funds when even their returns are getting negative?
[05:40:18 PM] => NS: Though the markets are volatile the negative are not negative at the moment. One has to look at the investment horizon and accordingly look to invest in a short-term money market fund , a bond fund or a g-sec fund because the interest rate risk with each of the above fixed income funds is different.

[05:41:08 PM] => Shilpa Jain: When you consider the debt market in India it is not as wide and known as the equity market why is it so?
[05:41:54 PM] => NS: Well it was so. But given the efforts of the RBI, SEBI and government the depth in the market has improved substantially over the last 2 years. We expect the trend to continue.

[05:42:50 PM] => Shilpa Jain: What do you think Debt market will remain the market for the institutional players as it is now, or it will slowly spread to the retail players also?
[05:43:27 PM] => NS: Efforts are being made to encourage retail participation. But we see mutual funds to be key vehicle for channelising retail resources into the markets.

[05:44:04 PM] => Shilpa Jain: Are interest rates are going to fall further? If yes then the right time of investment is over or it is still there?
[05:44:36 PM] => NS: The YTM in both the Gilt and corporate market are at historical low levels. The market is mainly driven by liquidity at this point of time. We expect the liquidity to be comfortable over the next 3 months and expect stable interest rate conditions.

[05:45:48 PM] => Manohar: What�s the relation between credit rating and returns?
[05:46:43 PM] => NS: If the credit rating of a paper drops it could result in a mark to market loss (because a paper downgraded from AAA to AA+ would trade at a higher YTM lower price) and thus lower the returns and vice versa.

[05:47:16 PM] => Rajesh: What will be the impact of UTI fiasco on debt markets and mutual funds in general?
[05:48:06 PM] => NS: As of now nil. Though investors in general are slightly cautious

[05:48:28 PM] => Sunita Rao: Has the ban on badla mobilized more money for MFs?
[05:48:59 PM] => NS: Yes a part of the money has moved to fixed income mutual funds.

[05:50:13 PM] => Sunil: What is your return expectations from well managed AMCs for 1) Income fund 2) MIP 3) Gilts for a one year time frame?
[05:52:22 PM] => NS: Gilts because of increased liquidity offer better returns over a bond fund over a longer period of time. However, the risk associated with both the Funds are different. You are requested to go through the offer documents of the schemes you wish to invest. We are unable to comment on the return expectations as we are not allowed to do so under SEBI regulations.

[05:53:48 PM] => Balu: As the economy is moving towards a slowdown, do you see a widening of spreads between gilts and corporate debt? What is the ramification on income funds on account of this?
[05:55:47 PM] => NS: Spreads after touching a low of 85 bps (AAA over Gilts - 5 year) in June 2001 are currently ruling at around 140 to 150 bps indicating increased uncertainty about the interest rate scenario. The spreads level would be governed by a lot of factors including slowdown like liquidity in the system, corporate performance etc.

[05:56:38 PM] => Sanjay: Gilts funds have performed very well in the last year, do you see the same performance to continue in the current year, also?
[05:57:47 PM] => NS : Analysis of historical data shows that gilt would continue to do well over longer periods of investment - as an investor rides different interest rate cycles.

[05:58:22 PM] => Rajalakshmi: Can you tell us how do you value non-traded bonds in your portfolio? In fact, typically what percent of corporate bonds in a typical debt portfolio will be rarely or not traded at all? Do you think the bond yield calculation approximations are being abused?
[05:59:45 PM] => NS: All the valuations (including non traded) are strictly in line with the valuations guidelines announced by SEBI, which leaves no scope for abuse. It�s difficult to quantify the percentage that may not trade at all.

[06:00:26 PM] => Ashok Mathew : What are the factors taken into consideration while structuring the portfolio of a debt scheme?
[06:01:07 PM] => NS: Interest Rate Outlook, Rating, Liquidity, Pricing, Management Group etc.

[06:02:00 PM] => Aishwarya: What are the benchmarks used for evaluating the performance of your different debt funds?
[06:03:53 PM] => NS: For government securities fund the total return index by I-Sec and JP Morgan can be used. For bond funds and money market short-term funds, industry average is the only bench mark as no widely accepted bench marks are available.

[06:04:55 PM] => Dinesh: Do you believe in constant churning of the portfolio or do you follow a buy-and-hold strategy?
[06:05:13 PM] => NS: Buy and hold unless the outlook on interest rate changes.

[06:05:27 PM] => KP: What is your view on Indian economy going forward?
[06:06:12 PM] => NS : We need to have structural changes to attract long term money on a sustained basis. Till such we will keep on experiencing high and lows instead of steady market conditions.

[06:06:38 PM] => Abhishek: Do you think it would be prudent to hold on UTI or should the small investor sell it off?
[06:07:25 PM] => NS: Cannot comment on a competing mutual fund.

[06:08:27 PM] => Jajoo : You have been one of the most successful debt managers giving excellent results / returns . What�s the secret behind your success - I mean what did you do that others did not?
[06:09:56 PM] => NS: We have an in house research team which tracks the various economic factors closely. Based on the same our calls on interest rate movements have been good. We have been rigorously following our internal interest rate outlook instead of altering the investment strategy frequently.

[06:11:42 PM] => Myiris: Ladies and Gentlemen, Mr. Surti has just answered the last question for this session.

[06:11:59 PM] => Myiris: We thank him for his time for a very enlightening Chat Session.

[06:12:48 PM] => Myiris: Please do join us on the 27th of July '2001 for a Chat with Mr. Nikunj Doshi (Head Research - Refco - Sify Securities India Pvt. Ltd.)

[06:13:01 PM] => Myiris: Thank You and Good Bye!