As long as interest rates are low, investors will continue to prefer equities as an asset class, believe experts
Net flows into equity mutual funds rose to a four-month high of ₹11,615 crore in November on a strong SIP book despite extreme volatility in markets. Equity schemes have been witnessing net inflows since March this year, highlighting the positive sentiments among investors.
As long as interest rates are low, investors will continue to prefer equities as an asset class, which becomes a default option despite elevated valuation, experts said.
“After the recent bull market cycle and supernormal returns, we can expect volatility to increase in markets from hereon. Even though we are not expecting end of bull markets, we are expecting relatively moderate returns in the next twelve months,” said Ashutosh Bhargava, Fund Manager and Head Equity Research, Nippon India Mutual Fund.
Bhargava’s advice to investors who want to remain invested in equities is for them to focus on multicap and flexicap funds. One can also look at opportunities in multi asset funds or balance advantage funds to reduce drawdown in order to better withstand volatility, suitable for conservative or new investors, he added.
The number of SIP accounts rose to 4.78 crore as on November 30 from 4.64 crore on October 31, while the monthly SIP contribution breached the ₹11,000-mark for the first time ever.
Though, Bhargava has recommended investors to consider systematic transfer plan (STPs) other than SIPs and lumpsum. STP allows one to periodically transfer a certain amount of units from one mutual fund scheme to another scheme on a pre-specified date.
“We are in a longer term bull cycle where market valuation has run up in the short term. Investors can take this period of potential consolidation to commit money to be invested as installments spread out over finite period of say 6 to 12 months. This way a committed sum can be systematically transferred from debt to equity funds and may help investors to achieve desired rupee cost averaging if market consolidation plays out,” he advised.
Sustained SIP flows have led to the overall robust inflows. “In our opinion, greater financialization of savings, low interest rates on Fixed Deposits & other fixed income instruments and lacklustre returns from gold over the last 1 year seem to have propelled retail investor participation in equities,” said Yogesh Kalwani, Head – Investments, InCred WealthStructurally, MF industry seems to be well poised to attract more equity flows over years to come given the relatively low penetration, more and more financialization, generation Z realising the importance of starting early, new age wealth creators from the start-up ecosystem, ease of execution via online portals/mobile apps and better reach of asset and wealth managers, he added.
