As equity mutual funds see higher inflows, what should MF investors do?
Equity funds have witnessed higher inflows as investors pour in higher amount during market fall. Retail investors have consistently shown investment maturity over the last few years where inflows have been higher at lower levels and lower at higher market levels.
Investors have been betting big on systematic investment plans or SIPs to generate long-term wealth. The AUM of the mutual fund (MF) industry rose to all time high levels in October 2022 to ₹39.5 lakh crore from ₹38.4 lakh crore in September 2022. The rise in AUM was predominantly due to mark to market gains in equity oriented funds.
While in September 2022 when equity markets saw a sharp fall, investors utilised it as an opportunity to put in higher amount while in October as markets recovered inflows were lower, highlighted brokerage ICICI Securities in a note.
Largecap funds recovered sharply from the September lows while midcap and smallcap funds underperformed as selective large cap stocks led to rally in the markets.
Banking funds continue to outperform whereas Pharma funds, after a brief period of outperformance in September, underperformed in the recent rally in October/November. Midcap and small cap funds have underperformed in October/November as the recent recovery in markets was not broad based and was backed by global pullback and large cap stocks in sectors like IT and banks.
Value/contra funds also saw a comeback in performance as stocks specific rotation within the sector was witnessed with investors doing bargain buying in underperforming stocks, the note stated.
“While investors still need to be cautious while investing in duration funds as absolute levels on dated papers still far lower than historical average, medium term papers (three to five years) offers good investment opportunity. Investors may start allocating their long term debt allocation into short term/medium term debt funds,” recommended ICICI Securities, adding that “with stock markets recovering almost all their losses and trading back to around all-time highs, it is better to adopt a buy on dips allocation strategy instead of lumpsum at current levels.”
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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Ganesh
http://ganesh@finplay.inFinance enthusiast, Mutual fund expert.