How to create MF wealth amid market uncertainty? Sunil Subramaniam exclusive

Subramaniam will play a key role in mentoring the next generation of mutual fund distributors (MFDs) through the newly launched AssetPlus Academy, a flagship initiative aimed at addressing the growing talent gap in the distribution ecosystem.

In this exclusive conversation with The Federal, Subramaniam draws on his four-decade experience in wealth creation to break down the evolution of investor behaviour, the rise of SIPs and why empowering distributors will be key to deepening financial participation across India.

Edited excerpts:

You’ve led Sundaram Mutual Funds as CEO and MD for nearly a decade, and have over 40 years of experience in wealth creation. What does wealth truly mean to you?

First of all, I must tell you that I come from a strong legacy in financial markets. My grandfather was the president of the Madras Stock Exchange, and so was my uncle. So in a way, you could say it runs in my blood. But for me, money is a tool, necessary, yes, but not sufficient to achieve happiness.

A beggar on the street, for example, can still be happy, but not without some share of money, however small. He may not be completely penniless, and he learns to live with whatever he gets. So really, it's about how you put money to use; that’s where the true power of money lies. That, to me, is absolutely critical.

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Wealth creation, in essence, is simply the postponement of consumption. You may want to buy something today, but you choose to save that money instead, with the hope that you'll be able to afford something better tomorrow. Why is that future thing better? Because of inflation, products tomorrow are naturally more expensive.

Wealth creation, in essence, is simply the postponement of consumption. If you can afford a Maruti car today but dream of buying a Benz ten years from now, it's wealth creation that enables that journey.

So wealth creation is the art of investing your savings in an asset class that can beat inflation. If you can afford a Maruti car today but dream of buying a Benz ten years from now, it's wealth creation that enables that journey.

To me, that’s the key insight: wealth creation is not just about accumulating money; it’s about fulfilling your dreams by choosing to delay today’s consumption for a better tomorrow.

At what age did you start investing, whether in mutual funds or just in general? I’m sure back then, you must’ve heard a lot of advice about sticking to FDs or buying gold. These days, market enthusiasts often call that kind of advice outdated or even foolish. How did you deal with that and carve your own path?

Like I said, because I had a stock market background in the family, I naturally started dabbling in stocks first, well before I did bank deposits or any other form of saving. And of course, I burnt my fingers quite a bit. As a kid, whatever pocket money I got, I’d use it to buy stock, probably started around the age of 18 or 19, when I got into college. And most of those were bought based on random tips. None of those stocks today are worth the paper they were written on, to be honest.

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The first real, solid investment I made in a stock was in State Bank of India. And that’s because the bank was my employer. I joined SBI soon after college, and the company had a share programme that employees were encouraged to participate in. There was an issue at the time, and I bought in. That’s one stock I’ve held on to till date. I haven’t sold a single share of it.

My journey into mutual funds began much later, probably in my late 20s. By then, I had already burnt my fingers enough times with IPOs and individual stocks; this was during the 1980s. It was only around 1987 or 1988, soon after I got married, that I made my first mutual fund investment. So I would say marriage was a key trigger. Until then, my stock purchases weren’t really investments; they were driven purely by the temptation to make a quick buck.

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Let me be very clear: back then, it wasn’t about wealth creation; it was about greed and the thrill of fast returns. But marriage changed my mindset. I got married in 1987, and soon after that, I realised the importance of saving for the future, especially for my children’s education. That’s when it really dawned on me that equities, as an asset class, have the potential to consistently beat inflation. That realisation marked a shift in my approach, and so my mutual fund journey started only after my stock market adventures.

In that sense, I don’t think I’m very different from today’s youth. Even now, young people tend to begin with stocks, and maybe even crypto, before gradually transitioning to mutual funds.

These days, there are so many market experts and 'fin-influencers' out there, and everyone's talking about the power of compounding. But I’m guessing it wasn’t quite like that when you first started investing. Do you remember how you booked your first real profit?

As volatility begins to ease, including uncertainty from the recent geopolitical conflict, I believe the SIP book could cross ₹30,000 crore by year-end. This is a long-term journey, and with mutual fund penetration still around 4%, the growth potential remains enormous.

I think what I did back then still holds good today. My first profit booking, for instance, was to buy a Sony studio. I had always wanted that studio, but I didn’t have the money for it at the time. Then I bought a stock, just one, and it suddenly turned into a multi-bagger. So I told myself, “Okay, this is my chance.”

I booked profits from that investment and bought the studio. So you’re absolutely right; it wasn’t about the power of compounding. It was really about postponing consumption. The studio had always been in my mind, and when the value of that stock crossed a certain threshold, I sold and fulfilled that goal. The next time I booked profits was to make the down payment on a house. I took a housing loan, and the margin payment came from another round of profit booking.

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For me, the stock market has always been a means to achieve life goals that are non-financial in nature. I’ve never booked profits just to reinvest in another stock or the same market. That was a conscious choice. And I think that approach still holds value today. Because honestly, the real power of compounding doesn’t come from churning your money within equities or mutual funds. It comes from letting it stay invested. I’m actually glad I didn’t get into that cycle of booking profits from one stock just to buy another. That’s also the advice I’d give to the youth today.

Look, it’s easy to criticise financial influencers; they’re often a bad word nowadays, and many people say you shouldn’t rely on them. But the reality is, every individual has a natural tendency to let their greed play out. It's human emotion. It's a bit like gambling and we all feel that thrill.

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Think about how people play cards during Diwali, or visit casinos in Goa. Or even the kind of response something like Dream11 gets; it shows that there’s an innate desire to take risks and chase rewards. So rather than saying “Don’t do it,” my advice is: go ahead, but do it with a purpose. Do it with a limit. Don’t throw all your money into a tip from a fin-influencer. Try a little bit if you must because honestly, you only learn by making mistakes. And that, I think, is the most important message I’d want to share with people today.

Crude oil prices have risen to a 5-month high of $76 per barrel in the backdrop of escalating tensions between Iran and Israel. We just had a bit of breather there on inflation coming below RBI’s median target of 4 per cent but how do you see it impacting the stock market?

So, I think crude is very critical for the Indian economy and stock market because we import around 85 per cent of our crude oil. Now, what happens because of this heavy dependence is that when crude prices rise, it creates a double impact. First, the dollar price itself increases. Second, because we import so much, the rupee tends to weaken, so the cost in rupee terms becomes even higher. This has a cascading effect.

Not only are you paying more for crude, but all other imported raw materials, whether it’s steel, iron, or anything else, also become more expensive simply because the rupee has depreciated. So it’s not just about crude prices going up; it’s the impact on the entire import basket. Now, in terms of inflation, there are a few things to keep in mind. First, crude is actually a relatively small part of the Consumer Price Index (CPI) basket, so its direct impact on headline inflation may be limited. Second, there’s what I call the “felt” inflation, how people perceive prices on the ground.

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Here, the government plays a role by subsidising oil marketing companies to avoid sharp spikes in retail petrol and diesel prices. That’s also why, when global crude prices fall, we don’t always see domestic prices come down proportionately; it’s managed to stay reasonably stable.

So, in a nutshell, I don’t expect this particular spike in crude prices to result in a major inflationary impact, at least not immediately. The delayed effect may come through the rise in costs of other materials. Also, most companies that import crude hedge their exposure. When prices were low, many of them would’ve booked forward contracts to lock in lower prices. So the current spike may not fully hit them unless the price rise sustains over a longer period.

The real threat emerges only if the geopolitical tensions, like a war, drag on. But I don’t expect this to turn into another Russia-Ukraine situation that lasts for years. This conflict will likely reach a resolution in a month or two, not in a week, but certainly not in ten years either. That said, in the short run, crude prices could still go higher.

Crude may not remain such a big worry, especially since the global economy is already in a slowdown mode due to trade tariffs. In a slowing world, demand for crude oil typically softens. So, in my view, this is a short-term phenomenon.

Why? If the US gets involved militarily, Iran could retaliate, possibly by disrupting the flow of oil tankers through the Strait of Hormuz. So, there’s a lot of geopolitical uncertainty at play right now, and that’s what’s making the stock markets nervous. However, if you take a three-month forward view, I think things will stabilise.

Crude may not remain such a big worry, especially since the global economy is already in a slowdown mode due to trade tariffs. In a slowing world, demand for crude oil typically softens. So, in my view, this is a short-term phenomenon. How short-term? Your guess is as good as mine.

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But if you’re a long-term investor, you really don’t need to worry about this temporary spike in crude prices.

Given the current volatility and talk of a global slowdown amid Trump tariffs, are fund houses sitting on cash or going all in? What’s the sentiment you’re seeing among fund managers today?

Mutual funds were largely sitting on cash till the end of May. Their cash balances were steadily increasing during that period. But starting from late May and into June, we’ve seen them begin to deploy that cash. Now, what are the reasons behind this shift? One key reason is that the earnings season was underway during that time. Domestic fund managers, particularly mutual funds, prefer to have some clarity on the outlook of companies before committing capital. They don’t just look at the latest quarterly results; they actively engage with companies to understand their future guidance.

That’s really what drives their decisions. Most fund managers are not investing based on just one quarter’s performance; they’re buying based on expectations for the next several quarters. Since the earnings season typically starts around April 10th and runs through mid-June, or at least till the end of May, fund managers tend to stay cautious during this window. That explains the rising cash balances during that time. But now, in June, I’m seeing a clear shift, a significant deployment of funds by mutual funds.

It suggests that fund managers now have better clarity around earnings guidance and are more confident in deploying capital. So going forward, I don't expect to see high cash positions this month. In fact, if you compare FII (Foreign Institutional Investor) flows to DII (Domestic Institutional Investor) flows, you'll notice that domestic flows are gaining momentum. That means the mutual fund managers have started deploying in the month of June.

We have six more months for the calendar year to end, where do you see the biggest opportunities: large caps for stability or small caps for growth?

If you have a 6-month outlook, the focus should be on large caps. It’s not that small-cap earnings have been poor; in fact, they’ve been quite good. The issue is that a lot of future growth potential is already priced in. And because the floating stock in small caps is low, even a small shift in flows can cause a significant move in their prices. That makes them inherently more volatile.

Now, the FIIs (Foreign Institutional Investors) have been nervous recently, largely due to global geopolitical tensions. But once those tensions ease, I expect the FIIs to return. And when they do, they typically start by investing in large-cap stocks. Therefore, I see strong buying support for large caps in the short to medium term, likely by the end of the year, driven by FII inflows.

The second big trigger on the horizon is the expected signing of the Bilateral Trade Agreement (BTA). As you know, July 9th marks the end of the 90-day pause in trade negotiations. Even just yesterday, Mr Trump mentioned that he's very close to signing the BTA with Mr Modi. Once that agreement is signed, it will remove a significant layer of uncertainty. The market should respond positively and move higher.

Again, that upward movement will likely be led by large caps, driven by renewed FII interest. Now, regarding small and mid-caps, they will remain more volatile in the short term. However, I don’t expect a major correction in that space. That’s because domestic fund managers have been deploying a large portion of their cash into mid- and small-cap stocks. In fact, most of the inflows from retail investors today are directed toward mid-cap and small-cap mutual fund schemes.

What we’ll likely see is a bifurcated market: domestic buying will continue to support mid- and small-caps, while FII inflows will primarily lift large caps. Given that FIIs have been largely absent for some time, their return should bring momentum, starting with large caps, especially through the rest of the year.

Despite market volatility and macro uncertainties, SIPs hit a fresh record of ₹26,688 crore in May. Do you think this signals a maturing retail investor base in India? And what can be done to keep this momentum going?

A large part of the credit for this growth goes to mutual fund distributors (MFDs). When you look at the SIP (Systematic Investment Plan) book today, it essentially works like a savings EMI. People typically earn monthly income, mostly from salaries or rental income, and they either spend or save from it. What the distribution community has done remarkably well is to convince investors to channel that saving not into traditional recurring deposits, but into mutual funds.

From September onwards, even during periods of high market volatility, the SIP book has remained resilient. It has not dipped below ₹25,000 crore and has now even touched record highs. That shows how much trust has been built, and I believe MFDs deserve huge credit for keeping investors calm and committed through turbulent times.

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In fact, if you fast-forward a year or two and look back at the SIP instalments made between September and now, those could turn out to be the most profitable ones. That’s simply because investing during market corrections means you're acquiring more units at lower prices, setting yourself up for stronger returns as the market recovers. It’s not just that investors are maturing; distributors are maturing too. They are aligning investment habits with the cash flows of their clients, which is critical. They are also educating investors on the importance of long-term thinking. Add to that the broader structural reforms taken by the Indian government, and the macro backdrop becomes even stronger.

India is now the fourth largest economy by GDP, and that optimism is filtering down to the public. Also, let’s not forget that bank deposit rates have been falling, particularly with RBI rate cuts. That makes mutual funds more attractive in comparison. So all of these factors have come together to ensure that even during volatile periods, investors have stayed committed to their SIPs. Now, as volatility begins to ease, including the uncertainty from the recent geopolitical conflict, I believe we could see the SIP book crossing ₹30,000 crore by the end of this year.

This is a long-term journey, and with mutual fund penetration still at just around 4 per cent, there’s enormous scope for growth. That’s why we need more MFDs, and this is where Asset Plus Academy plays a crucial role, by helping bring more trained, motivated MFDs into the system. Unless someone goes out and educates people about the benefits of long-term investing and SIPs, we won’t see the next wave of participation.

With only about 50 AMCs in the country, even all their staff combined can’t cover even half a per cent of the population.

We need this army of MFDs to go out there, spread awareness, build trust, and guide investors through their financial journeys. And I truly believe this is a very important time in the evolution of our financial ecosystem. The work that Asset Plus Academy is doing will be hugely valuable in the years to come for the industry, for investors, and for the Indian economy.