The mutual fund (MF) investors got some respite on Friday, with the markets staging strong recovery. Over the last one-month period, major equity categories had seen sharp declines of 17-20 per cent with markets reeling from Coronavirus scare.
Large-cap schemes have seen one-month negative returns of 20 per cent. Mid- and small-cap schemes have seen over 17 per cent hit on net asset values (NAVs) in same period.
The above return scorecard is likely to improve after markets logged their largest-ever single-day recovery on Friday after falling as much as 10.8 per cent in intraday session. The Nifty closed 3.8 per cent higher on Friday.
However, the investor sentiments had turned weak amid the recent market selling.
“Client queries have been on the surge, as investors want to know whether they should redeem their investments or stay the course,” said an MF distributor.
Industry players remain concerned that continued volatility in markets can significantly hurt equity flows. In February, the industry received Rs 10,795 crore of equity flows, increasing 37 per cent over previous month.
Meanwhile, the systematic investment plans or SIPs — which have been giving cushion to the industry — saw marginal dip at Rs 8,513 crore in February.
The short-term returns of equity schemes have taken a sharp beating in the last few days, after market saw a 2,000-point crash on March 9.
Up until then, large-cap schemes had given negative returns of around eight per cent, while mid- and small-cap schemes were down seven per cent apiece.
“Weak hands would look to exit their MF portfolios if the market volatility continues. However, investors that stay put and are able to handle the market volatility can make robust returns over the long-term,” said Srikanth Matrubai, chief executive officer of SriKavi Wealth.
“The sell-off seen in March will truly test the long-term orientation of the domestic MF investors. We will have to closely watch if there are any sharp rise in closure of SIP accounts,” said senior executive of a fund house.
In February, the SIP closure ratio was at 50 per cent. For every two SIP accounts open, there was one request for closure. In February, 11.39 lakh SIP accounts were opened, whereas 574,000 SIP accounts were discontinued.
Overall, Rs 3.1 trillion of investor assets coming into the industry is through the SIP mode. This accounts for 11 per cent of the total industry assets of Rs 27 trillion.