Markets are bleeding. What should mutual fund investors do?

The benchmark index Sensex fell by 1,688 points since the finance minister presented the Budget 2018 in parliament on February 1. The market sentiment is badly hit by change in long term capital gains tax, meltdown in global markets, and anemic corporate earnings. The mood has changed dramatically in the market. What should mutual fund investors do against this backdrop?

“The current correction seen in the Indian equity space is largely owing to the correction in global markets,” says S Naren, ED & CIO, ICICI Prudential AMC.

The US market was down by over 1,400 points, and Asian markets were also badly hit. Investors were becoming cautious and parking money in safer avenues like Treasuries. However, there is no unanimity about the reason behind the market fall. Except for the nervousness about the new Fed chief, the market wasn't perturbed about anything particular prior to the fall.


Naren says the US market has run up very fast in the last 15 days and a correction was on cards. He says India is a great structural story for the next 10 years. “Given that the current correction is due to global reasons, we expect markets to stabilize once the current bout of volatility is over,” he adds.

Shweta Jain, Founder and CEO, Investography, asks mutual fund investors to ignore all the noises around them and focus on their goals, risk appetite and their asset allocation. However, she agrees that while it sounds very simple thing to do, practicing it is not as easy.

Mutual fund experts are asking new investors to stay away from smallcap and midcap mutual fund schemes. “In the Indian context, small and midcap stocks are overvalued. Hence, from a valuation perspective, one can consider investing in largecap funds and balanced advantage/dynamic asset allocation category of funds,” says Naren.

Mutual fund advisors believe that instead of worrying about the market movements, investors should focus on their goals. It is the right time to review your equity exposure and goals and see how much more is needed to meet your goals, says Jain.

For investors, who have their goals anytime within five years, Jain advises to start locking returns by transferring monies to safer assets. For those who have their goals five or more years away, continue to invest via SIPs towards your goals as per the desired portfolio allocation.

Mutual fund advisors say investors should to learn to keep emotions out of investing and understand the risk involved in the asset class they are investing.