Mutual Fund Volatility | Is it time to buy more? Here’s what mutual fund managers suggest

Mutual fund investors are going through an anxious time due to market volatility. The past few weeks have been extremely volatile due to the Russian invasion of Ukraine. The economic fallout from the crisis is also affecting Indian markets. ETMutualFunds spoke with mutual fund managers to find out how investors can insulate their investments from shocks at this stage of the market.

The key market index, S&P BSE Sensex, has fallen from its high of 58,926 points to 53,424 in the past month. The sensex crashed over 1,700 points to hit an intraday low of 52,542 on March 7. Nifty plunged more than 500 points to 15,741 amid weak global signals and soaring crude oil prices. Fund managers believe that while the current situation may worry many investors, there are opportunities.

“The best thing to do is look at valuations. At 15,700 Nifty, we are trading less than 19x FY23 earnings. This is a steep decline from nearly 22x valuations. Pockets of markets have seen the moss disappear completely. REITs have been net sellers of $13 billion in the past 70 days. Overall, the market is spooked by geopolitical developments. Since we cannot and do not know exactly how this normalizes or worsens, the long-term investor should be more constructive on equities,” says Vinit Sambre, Head of Equities, DSP Mutual Fund.

Over the past month, returns for most mutual fund categories have fallen sharply. Banking sector funds fell 13.59% in one month; Small cap funds fell 11.12% and mid cap funds fell 10%. Plans focused on PSU banks have declined further. The Kotak PSU fund fell 18% in one month. There are many programs that deal with the economic impact of the global crisis.

Fund managers say that many stocks are very attractively valued and can be very good long-term buys. Investors with a longer-term investment horizon should use this drop as an entry point and increase their equity exposure.

“We believe that this current volatility due to the Russian-Ukrainian conflict presents a very good opportunity for Indian investors to invest consistently over the next 1-2 years. We believe that the optimal approach is to ladder its investment through SIPs or to invest a lump sum in balanced benefit/asset allocation strategies,” says Chintan Haria, Head of Products and Strategy, ICICI Prudential Mutual Fund.

Fund managers also suggest retail investors shouldn’t overdo it with tactical calls. Investors should understand that the crisis may not be reversed overnight and should therefore plan for the longer term. “It is advisable to buy and add equity exposure in small chunks. Weekly STPs or stepping up SIPs in diversified funds are a good idea. Investors can also use the allocation fund category of ‘dynamic assets to see through the volatility and participate,’ explains Vinit Sambre.

Dolores W. Simon