Stay Tuned With MFs During A Stormy Ride

A disciplined approach along with investment in mutual funds will help investors in long-term wealth creation

- Ashfaque Ismail

On May 12, 2014, Sensex closed at an all-time high of 23,551 - an intra-day rise of 2.42 per cent on expectations of a strong and stable government at the Centre. Five years later, in June 2019, the benchmark 30 share index peaked at 40,312, with a steep jump of 16,761 points. Between May 2014 and June 2019, Sensex saw a whopping 70 per cent rise. Have the effects of market volatility percolated to the mutual fund industry? How have they benefitted the investors? Market experts say there are two kinds of mutual fund investors.

Experienced investors with over last 15-20 years have had a positive experience. However, new investors with a few years in the trade would not have experienced good returns due to disparity in returns across market capitalisation.

Was the market volatility in favour of investors? According to Nilesh Shah, MD, Kotak Mahindra Asset Management Company, this is actually the time to invest in small and midcaps. “It is always difficult to figure out the direction of the market in the short term but valuations are in favour of the long term investor.”

He further adds, investors who can bear the current volatility and invest in disciplined manner will eventually reap the benefits in the long term.

For him, markets assuming indices such as Nifty 50, are discounting all the negatives. This is causing super large caps to trade at very high valuations and some are trading at their historical best. Mid caps and small caps, he says, are trading below their historical valuations. “If you look at the flows, domestic mutual funds have been net buyers month after month led by a healthy monthly SIP book of more than ₹8,000 Crore in the industry,” he explains.