Koel Ghosh, Head-South Asia, S&P Dow Jones Indices, says market participants in India are moving away from plain vanilla market beta strategies and investing in multi-asset or thematic strategies such as environmental, social and governance (ESG), factor-based indices. interest has been indicated. ), Metaverse and Crypto. in an interview with MintShe said that diversification will never go out of style. Edited excerpt:
What new trends are you seeing in terms of disciplines or geographies?
The way markets have responded in the post-pandemic world has made market participants realize that disruption leads to innovation. Market participants are looking at the next disruptive aspect that needs to be addressed. Market participants have been exploring the metaverse, crypto and another topic that has been around for a long time, but is now looked at more seriously, is sustainability and ESG. The sustainability theme is expected to grow rapidly in India.
Do you think the regulations around ESG and disclosure by companies are strong enough?
Regulations, for example, the latest Business Responsibility and Sustainability Reporting (BRSR) regulations in India cover 1,000 companies, which will expand to another 1,000 companies. Some companies are actively adopting these guidelines. Many of these companies also have sustainability officers. With this kind of focus, we should start coming through with quality information. From index perspective, we offer BSE 100 ESG Index which consists of 100 companies. More information from companies will help the overall market as a whole and help us develop a more stability-focused index.
What more needs to be done on the ESG regulation front?
Regulation will continue to change and evolve. What is important at the moment is to educate the investment community on the importance of sustainable investing.
According to the latest SPIVA report, Indian active funds saw a major rebound in their performance in 2021. What were the reasons behind this? ,read more,
Markets keep changing and last year it was a very volatile market. In addition, sometimes there is a factor of spread, which is the spread of returns within an index. When there is a high spread between the components, the indices move much more than when there is no spread. In years where there has been low spread, we have seen a high number of managers perform poorly. So, it depends on how the market is placed and how dynamic the markets are. If you look historically, large-cap fund managers have struggled to beat passive strategies. If there are inefficiencies in the market, this allows the active to have a slight edge over the passives.
How can index investing help investors during volatile markets?
The first positive aspect is consistency. An index follows its published methodology, is transparent and is publicly available to market participants. The flip side is lower costs because you don’t have fund manager costs or research costs. Also, if you look at the SPIVA report, in some sectors, index investments can outperform active fund returns. Moreover, diversification to a great extent can also help the market participants.
Anyone interested in crypto or metaverse-based products in India?
However, there is certainly interest in whether this will result in a product for the market or not remains to be seen. However, the demand for new products is increasing. So, we are looking at electric vehicles, drone technology and smart transportation.