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Tag Archives: market crash

Opinion | Why do equity and debt MF investors react differently?

Posted on May 27, 2020 by monikahalan
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The Indian retail equity mutual fund investor has continued to baffle commentators and policymakers by her behaviour across the previous few mega market mayhem events. Equity flows have remained net positive and the haemorrhage that a covid-19-induced market crack should have caused was clearly missing up to the end of April 2020—with some of the worst one-day falls across a few days covered in that period. Data shows that retail money in equity funds actually rose over the worst of the market crash in the three months of February, March and April 2020 and was 55% higher than the previous year same period. Systematic investment plans (SIPs) have held their flows at about ₹8,500 crore a month—there have been pauses but no dip. But the same retail investor has rushed to redeem his debt fund portfolio and flown to the safety of fixed deposits that have seen a 33% growth over the same period. What’s going on? This should have been the reverse—a rush to safety should have killed the equity funds. When commentators and policymakers put this down to quirky or eccentric investors, they make the error of looking at retail investor behaviour divorced from the marketplace in which they operate. In fact, the actions of retail investors show the robustness or flaws in the regulation that affects how firms behave in the markets and how smartly they are able to bend the rules and thereby reduce trust in the marketplace.

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Posted in Expense Account, Mint, Money, Mutual Funds, Personal Finance | Tagged Covid, debt funds, equity funds, FDs, market crash, Sebi, SIPs | Leave a reply

Money lessons from the financial crisis for SIP investors in India

Posted on September 13, 2018 by monikahalan
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It is scary to see your life’s investment shave half its value in a free fall in stock prices. Indian stock market investors saw such an episode starting January 2008. If you had ₹1 crore in an index fund linked to the Sensex as on 9 January 2008, by 9 March 2009, its value was down to just under ₹41 lakh. It is gut wrenching no matter how strong your stomach for risk is. The whole time over the year you were driven by sheer panic to sell as the signals about an imminent global financial crisis caused markets to teeter on the edge and periodically belch out another giant fall in stock prices. Some brave hearts held on to their investments during the bloodbath, married as they were to “long-term” investing. By 4 November 2010, they saw their money recover as the Sensex regained its 2008 peak. The market since has given an 8% average annual return. Who are the people who came out on top and what did they do right? A decade, and nearly another 20,000 points on the Sensex later, there are three lessons that we, as retail investors, can draw from the North Atlantic Financial Crisis that had a trigger point when the $639 billion multinational behemoth Lehman Brothers went bankrupt on 15 September 2008.

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Posted in Expense Account, Financial Literacy, Investments, Mint, Mutual Funds | Tagged Lehman, market crash, mutual funds, SIP | Leave a reply

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