How Mutual Fund Investors Should React To Market Turmoil

India's political landscape took centre stage this week, with the result of the 2024 Lok Sabha elections throwing up a surprise that none of the pollsters had predicted. Equity markets that were ebullient at the start of the week, nosedived after the Bharatiya Janata Party-led National Democratic Alliance won tigther-than-expected margin.

The BJP managed to capture 240 seats and will need support from its allies to form the government. With the benchmark Nifty 50 losing close to 6% and the broader gauges losing even more on Tuesday, most mutual fund portfolios tumbled.

But investors are seemingly not too perturbed. At least, that's what mutual fund distributers and advisors say.

There aren't too many queries about redemption, according to portfolio managers who spoke to NDTV Profit.

Rather, investors are seeking opportunities to reallocate into other schemes, where better opportunities for future returns have emerged, said Mohit Gang, chief executive officer at Moneyfront.

Though the market momentum may have been interrupted by Tuesday's fall, the direction of India's equity market is likely to remain the same, according to him.

"Most retail investors are in a wait-and-watch mode, while the seasoned investors are looking to make tactical investments," Gang said.

Systematic Investment Plans, which have formed a cornerstone of domestic inflows into equity markets, have seen record monthly inflows every month from July 2023. In April, mutual funds received gross inflows of Rs 20,371 crore through SIPs.

In the past, sudden falls in the market have prompted investors to take money off the table and also stop SIPs. But this is not desirable, according to Prableen Bajpai, founder of FinFix Research & Analysis.

"SIPs should continue, because they are designed to help investors benefit from declines in the market," she said.

There is a lot less panic as people understand the market better and true investors are not fazed, said Amol Joshi, founder of PlanRupee Investment Services.

Investors need to stick to asset allocation and focus on their long term financial goals as they continue to partially invest despite the movements and cycles of the market, Joshi said.

Focusing on long-term goals and building balanced investments that are stable through market cycles should be the consistent focus.

"The market dip definitely unlocks instant buying opportunities, but it is important to cautiously invest during exuberant times like these," said Santosh Joseph, founder of Germinate Investor Services LLP.