Mr. Murthy Nagarajan

Head - Fixed Income, Tata Asset Management Limited

Murthy Nagarajan is the Head of Fixed Income at Tata Asset Management. With an expertise spanning decades in the debt market, Murthy brings in a rich and valuable industry experience of more than 22 years in the financial services space. Prior to his appointment at Tata Asset Management, Murthy was working with Quantum AMC. He was also associated with Mirae Asset Global Investment India Ltd in the Investment Department as the Head of Fixed Income for more than two years. Murthy holds a Master of Commerce degree and has completed his PGDBA from Somaiya Institute of Management & Research.

Q: A lot of credit downgrades have happened in the recent past and it sounds a bit scary for the fund managers. From your perspective, how bad is the situation today?

Answer: RBI has shifted to an accommodative stance and the cumulative rate cuts since February 2019 is 110 basis points. First quarter growth rate of 5 %, means industry is not performing well. There is dislocation in the credit channel due to NBFC issues. With the measures taken by RBI and Government, growth is expected to pick up in the coming quarters. This should hopefully lead to downgrades and defaults coming down in the coming months.

Q: Most of the investors do not realise that mutual funds have done a far better job than banking industry when it comes to avoiding bad debt or papers. The loss by the mutual fund industry is insignificant. Would you like to elaborate on this fact?

Answer: Performance of debt mutual funds have been competitive as compared to Banks over a longer period of time. The recent defaults are more due to corporate governance issues and is concentrated on NBFC who have a large wholesale book. Mutual funds have been reducing the exposure to these types of companies over the last one year.

Q: The debt markets have been facing a lot of liquidity issues of late. Does this restrict the portfolio decisions you would like to make and how do you cope up with this issue?

Answer: Liquidity issue are always considered when creating a portfolio. We have been consistently reducing our illiquid papers by not rolling over /selling our papers. We have Internal Risk Control (IRC) matrix at Scheme level, which sets Prudent limits on Schemes from buying lower rated papers. The type of exposure and liquidity required to be maintained is defined in the IRC for each scheme. With increased uncertainty in markets prevailing due to credit issues, our portfolio has become more conservative.

Q: Have we reached to the bottom of the stressed assets / NPA problem? What is your assessment of the problem?

Answer: It is difficult to call whether we are at the bottom of the NPA cycle. RBI and Government are infusing liquidity and capital in the banking system. For the NPA problem to reduce in the system, we require growth to pick up. Growth may pick up if RBI and the Government are able to transmit the fall in repo rates through the banking channels.

Q: What is the right way out for the economy according to you? Has the government been doing enough?

Answer: RBI may have to cut interest rates aggressively; this will force banking sector to lend. Lower rates will hopefully make consumer buy more at the margin. At present, banks are in a risk aversion mode, due to increasing levels of uncertainty.

Q: What would be your advice to investors looking for medium to long term investments in debt? Where should they invest?

Answer: Investors can look to invest in funds which have high credit quality papers in their portfolio. Short Term Bond Funds, Banking and PSU Debt Funds are the categories in which the investors can look to invest in the medium term.

Disclaimer: The views expressed are of Tata Asset Management Ltd. and are in no way trying to predict the markets or to time them. The views expressed are for information purpose only and do not construe to be any investment, legal or taxation advice. Any action taken by you on the basis of the information contained herein is your responsibility alone and Tata Asset Management will not be liable in any manner for the consequences of such action taken by you. Please consult your Financial/Investment Adviser before investing. The views expressed may not reflect in the scheme portfolios of Tata Mutual Fund.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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