As the government is continued to provide various stimulus to cushion the overall demand in the economy, retail investors should not worry about the recent slowdown.
The talk of a slowdown in the Indian economy was keeping mutual fund investors perturbed. After the finance minister’s recent announcement on slashing of corporate taxes, the stock markets went berserk rising nearly 1921 points as expectation of corporate sector revival led by increasing consumption across sectors looked likely in the months ahead. With lower corporate taxes, passing on the benefit to end consumer is expected to spur demand and hence corporate earnings in the process. “The recent stimulus provided from PMO by reducing the corporate taxes and GST slabs has resulted in a huge rally in the market that has not been seen in years. The government has accomplished to bring the optimism back in the market from the continuous slowdown the economy was going through,” says Kaushlendra Singh Sengar, Founder& CEO, Advisorymandi.com
But, how concerned should the retail individual investor be with the talks of slow down all around? “The current slowdown is mainly led by the weakening of auto volumes among other factors. The Government looking at the latest dismal GDP print, admittedly being a lagging indicator, has made its stance more pro-growth oriented and the slew of reforms announced in the last few weeks should no doubt allay some nervousness,” says Rajesh Cheruvu, Chief Investment Officer, Validus Wealth.
There is also signs of global slowdown which may impact internal economic conditions. Inflation will continue to play an important role and will decide on future rate cuts. With demand picking up in the economy, the fears of slowdown may fade as well. “As the government is continued to provide various stimulus to cushion the overall demand in the economy, retail investors should not worry about the recent slowdown,” adds Sengar.
Mutual fund investors especially new ones who had started investing over the last few years are seeing their portfolio deep in red. Even after the recent rally, the fund values are nowhere near the capital invested. Has the investor confidence shaken especially when it comes to MF SIPs? “Yes, the retail investors have been freaked out after having a negative alpha generation in this year. But a market like India, which is riding on the path of becoming a Rs 5 trillion economy provides opportunity to add the decent companies at a bargained price,” says Sengar.
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However, equity markets are inherently volatile in nature and not a one-way street. Investors need to capitalise on opportunities when the markets are low by investing more by expecting better returns over the long term only. “In times of volatile market wherein asset prices have a tendency to slip downwards, SIPs are an ideal route to market since for the same Rupee value invested one can get exposure to a larger quantum of the asset as prices get cheaper, says Cheruvu. Therefore, investors need not be wary about the tips floating around on the social media and instead take long term decisions about their mutual fund investments.