The net inflows into equity mutual funds are at a 24-month low, at ₹6,158 crore in January, according to data from the Association of Mutual Funds in India (Amfi).
“Owing to market volatility and near credit events, market sentiments have been affected. However, the net inflow for the month is positive,” said N.S. Venkatesh, chief executive officer, Amfi.
Meanwhile, systematic investment plans (SIP) continued to grow—sip in January was ₹8,063.67 crore, compared with₹8,022.33 crore in December, according to the Amfi data. “There is a little bit of slowdown in the last couple of months in equity owing to market volatility over the last three to four months. Now, with elections around the corner and the overall global economic scenario not being great, maybe people are waiting and watching the market. But SIP is showing increasing trends, which indicates that retail investors are continuing to invest through the SIP route because they are not looking at timing the market right now. Retail investors are showing faith in the market,” said Venkatesh.
Will the market volatility continue?
“The macroeconomic factors favour India with good growth, and we have to see the quarterly earning number. If the earning numbers stabilise, along with higher growth of 7.5% of GDP, you should definitely see certainty by the end of May and people will come back. I agree that correction has happened with small-cap and mid-cap to a large extend, and large-cap has also corrected. But local flows are supporting the market. After the polls, you will see both foreign and local investing supporting,” said Venkatesh.
What it means for you?
From the point of view of a retail investor, you should look at mutual funds from a long-term perspective.
“If you have invested for, say, 18 to 24 months and have seen zero returns, you would tend to get worried over what is happening on SIPs and its performance. You should look at rolling returns over a five year period. The long term is what you should look at for wealth creation. There may be uncertainty in the market due to election, but it has always been difficult to time the market as it tends to discount such events way in advance,” said Prateek Pant, head of products and solutions, Sanctum Wealth Management.
“Our message to investors is to continue with disciplined investing. Remember that it is not important to time the market but spending time in the market is more important,” Pant said.
When you are investing in equity mutual funds, don’t look at one or two-year returns. Look at staying invested for a long term, over seven to ten year period.
For your wealth to grow, you need to have exposure to equities and going through mutual funds is a prudent move. Remember you will not get quick double digit returns within a month or a year. You will need to be patient with mutual funds. Also, if you don’t know which fund to pick, seek the help of a financial planner to build a good portfolio.