What mutual fund managers are saying (at this time)

You can view the video here

I know I’ve been more active than usual on social media and I’ve been sending more emails than my customary monthly article. It’s partly because I am wfh and trying to ignore my kids by busily typing and peering into my screen :). There have been quite a few con-calls held by mutual fund managers and I though I could quickly compile the key points

1. The last time we had such a sharp fall was in 2008 and before that in 2000. If you’ve been an equity fund investor for less than 10 years, you are used to seeing the market fall but also correcting quickly. The current fall could be causing a lot of anxiety and that’s ok

2. Due to the wide spread of the coronavirus and subsequent measures of lockdown, corporates are going to be impacted. There is a fear of recession setting in. 

3. The level of impact is going to be very different for each industry and company. Some will not be affected and possibly do better than before, some will be marginally affected and some will be greatly affected. 

4. The true impact will be known only after companies weather the Apr – Jun quarter and declare their corporate earnings

5. After such steep falls, market usually recovers sharply (usually in less than 12 months). 

6. Unless you have been investing directly in shares, it is not recommended to start now. As mentioned in point 2 and 3, some of the market leaders could be affected badly so your investment may never recover. 

7. With regards to point 4 – markets recovering quickly, if you are investing in an equity mutual fund, it is important to only invest those funds which you won’t need for the next 3 - 5 years. You should also be prepared to see volatility in the returns as no one can predict when the market will ‘bottom out’ i.e. start moving upwards consistently.

8. Large cap stocks are now available at attractive valuations. It still doesn’t make sense to take money out of mid-cap and small-cap funds and place it here. Mid cap and small cap stocks had already corrected before this fall and they were available at reasonable valuations. Investors are advised to stick to their asset allocation strategy.

9. Coming to debt funds, their underlying portfolio consists of corporate papers, treasury bills and government securities are marked to market every day. The huge amount of selling has caused market value of these securities to come down. Remember there has been no credit default in these portfolios and funds typically hold papers till maturity and hence, the effect of mark to market is reversed later.

10. With regard to point 3 – corporates getting affected, it is important to keep a watch on the performance on the corporates in the debt fund portfolio because if there is a sizeable exposure and if the corporate starts defaulting then your investment could go down in value.

I hope this note helped throw light on some of the questions which have been on your mind. If you have any specific queries or just want to chat about your portfolio or the current market situation, please reach out to me at [email protected] / 9900335853.