Mutual fund investors stay calm on Manic Friday

India’s mutual fund (MF) segment industry saw a substantial rise in transactions from retail (small) investors on Friday, even as the Brexit sent shock across the global financial markets.

Despite a strong knee-jerk reaction, which saw the Sensex plummet over 1,000 points in the initial trade, investors didn’t press the panic button. On the contrary, retail investors used the sharp correction in the markets as buying opportunities, said observers.

“Brexit is a non-issue for India. Currently, there is a knee-jerk reaction with sentimental impact on stocks, which might be there for another few days. These are nothing but opportunities to buy stocks at a discount due to a global event. Inflows will continue,” said Prashant Jain, chief investment officer (CIO) of HDFC MF.

Several fund managers engaged with investors and the distributor community through the day, to educate them on the market. Senior officials with fund houses said regular investors were seen increasing their purchases.

Sector officials say there was nearly a five-fold rise in number of transactions. These included additional purchases in systematic investments (SIP), lump sum investments and new applications. This could not be verified.

“It’s the initial stage of this one-off kind of event (Brexit). However, there was no panic among retail investors. Rather, they have been buying. Our markets lost the past few days’ gain today and it is not so that there was a catastrophe kind of situation,” said Sunil Singhania, CIO of Reliance MF.

In recent years, domestic investors have set an example of opportunistic buying during panic times, especially when there has been a global event.

“And, today was not an exception. Investors are much more mature than before. We have had good inflows. As of now, there is no panic among customers. One needs to note that global financial markets are interlinked but real markets are not. I do not see reasons why investors will not keep putting money in equities,” says Nimesh Shah, managing director, ICICI Prudential MF.

Domestic investors have played an important role over the past two years in countering a pullout by foreign investors. Nearly seven million new equity accounts have been opened and, put together, there has been a net inflow of Rs 1.5 lakh crore, giving support to Indian stocks.

The monthly systematic investment plan (SIP) book is now about Rs 3,300 crore. This is quite a sticky and steady flow in the system, adding close to Rs 40,000 crore of new money for investments a year in stocks through equity schemes. Fund managers say investors should not be contemplating cancelling their SIPs and should increase allocation to equities in such uncertain times.

Navneet Munot, CIO of SBI MF, says: “I think domestic inflows are likely to remain robust despite the current global uncertainty. This will continue to help our market countering any FIIs’ (foreign institutional investors) pullout. These are opportunities which investors may not like to miss. They have been underweight on equities and such corrections allow them to increase allocation.”

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