Building A Successful Wealth Creation Strategy

Industry stalwarts share their insights on long-term goals to protect against the downturn

- Himali Patel

The COVID-19 pandemic has not only caused tens of thousands of fatalities worldwide but has also thrown the global economies into a tailspin with the shutdown. One thing remains obvious is that economic output is expected to slump sharply in the coming days. According to the International Monetary Fund (IMF), the pandemic will shrink the world output by 3 percent in 2020. It has been a turbulent time for the equity and the mutual fund markets in India as the Indian markets (NSE Nifty 50) has seen a meltdown of over 30 percent from their peak and is currently down by 24 percent on a Year-To-Date (YTD) basis as on April 20, 2020.

Similarly, Assets Under Management (AUMs) of the mutual fund industry saw a dip of 18.2 percent sequentially to reach ₹22.3 lakh crore in March 2020 reveals data from Association of Mutual Funds in India (AMFI). If compared to March 2019, the industry has fallen by 6.4 percent translating to an asset base reduction of ₹1.53 lakh crore in FY2020. The equity AUMs have suffered due to the massive sell-off in the broad market, despite net inflows in open-ended equity-oriented schemes reached ₹11,723 crore in March 2020. In the wake of this crisis many economists and market experts have expressed the types of post-pandemic recoveries one can witness. This would either be a “V-shaped” recovery, where there is a strong and rapid recovery of the economy post slump in GDP or a “U-shaped” recovery where the GDP downturn is longlasting and takes longer than 12 months to recover.

However, in the end it is futile to time the market, or call the bottom. No one can predict the shape of the recovery – U, V, W, or some other, as the pandemic of this nature, is often hard to model.