Zerodha's Nithin Kamath reiterated that he will only launch passive funds, which are characterised by low cost for investors and track an index to generate in-line returns, as per an MC report. There is no plan to launch active funds, it added.
Zerodha will launch its mutual fund product within three months of getting final approval from the market regulator to set up its asset management business, Chief Executive Officer of India’s biggest stock-broking firm Nithin Kamath has told Moneycontrol.
Zerodha, which has a user base of one crore, in September 2021 got in-principle approval to set up a mutual fund business. The company has to put in place a board, appoint trustees, hire custodians, etc. then go back to the regulator for the final approval.
The startup has completed the process but Kamath refused to give a timeline for the expected approval during a recent phone interview with Moneycontrol from Bengaluru.
“Getting an AMC licence in this country is quite hard…whenever that final approval comes after that, within three months, we'll be able to launch,” he said.
In recent years, many companies looking to set up a fund management business have chosen inorganic route by acquiring an existing business.
For instance, Flipkart co-founder Sachin Bansal-led Navi acquired Essel Mutual Fund in 2019 and renamed it. Similarly, Prashant Khemka-led WhiteOak Capital acquired Yes Mutual Fund in 2021.
Even in these cases, approvals don’t come that easily but this route “saves you at least six (to) eight months at least,” Kamath added.
He reiterated that he would launch only passive funds, which are characterised by low cost for investors and track an index to generate in-line returns. Kamath said there was no plan to launch active funds.
Kamath has said in the past that Zerodha’s mutual fund arm would be launching funds like Vanguard Retirement Fund. These funds are index funds that have a target year, with the sole purpose of accumulating wealth for retirement.
India market outlook
As global markets have taken a pounding, the Indian market has been relatively strong. The equity indices have held better than their several global counterparts, surprising many money managers.
Kamath said the resilience was expected because there was almost no leverage in the Indian capital market ecosystem, especially in comparison to the US, a highly leveraged market.
“When one bout of selling happens, there'll be margin calls, and then there is another bout of selling…when selling happens, they tend to fall so much, and we are not falling as much because that problem doesn't exist in India,” he said.
Kamath said a lot of capital was chasing India right now. Not just retail money but foreign capital as well because India was one of the last few countries where was growth, a stable government and favourable demographics.
While he refused to predict the market in the near or long term Kamath did say India will continue to outperform other markets.