It is an irony that November witnessed all time high SIP number and also saw net negative net sales for equity and hybrid put together. Anand Vardarajan, business head, Banking, Alternate Products & Product Strategy, Tata Asset Management in an interview to Saikat Neogi says, those who are just about at par on their investments would have exited their investments in November at the first sign of some profit. Edited excerpts:

Net equity inflows in mutual fund in November crashed to Rs. 1,312 crore, the lowest since June 2016. Why did this happen?

Markets moved sharply in November. Foreign flows have been strong in the last three months and November was by far the best for the year with net inflows of $3.2 billion in Indian equities. However, domestic investors have been in risk off mode. It’s the classic trapped elevator syndrome! If one needs to go to a higher floor and for some reason the elevator faces some glitch, people would usually get off the elevator in any floor the doors open. Their best chance of reaching their desired floor quicker will be by using the elevator but that trapped feeling would make them exit the elevator. Those who are just about at par on their investments would have exited their investments at the first sign of some profit.

Collections through systematic investment plans hit an all-time high of Rs. 8,273 crore in November. How are investor overcoming behavioral weakness during volatile market phases?

It’s an irony that November witnessed all time high SIP number and also saw negative net sales for equity and hybrid put together. Investors are getting impatient with equities. Last couple of years markets haven’t done so well, especially small and midcaps. The best way to deal with volatility is to take the SIP route. It’s a slow and sure way of beating volatility and staying disciplined.

Why are aggressive hybrid funds, conservative hybrid funds and equity savings funds reporting outflows for last few months?

It is typically conservative investors who invest in these categories of funds. While the funds have done reasonably well, investors are perhaps spooked by volatility.

Do you think more investors will crash out of the market if the volatility continues?

I think the advisor and distribution fraternity have done a good job in managing investors over the last so many years. It obviously becomes difficult managing expectation and investor emotion during these phases. They understand that their role is more investor management than investment management.

What would you like to advice to the investors in the current scenario?

We are in an environment of low GDP growth and high price to earnings). Typically, the best times to invest is when you have both low PE and low GDP akin to 2003-2004. High PE and high GDP is bubble phase. High GDP and low PE is utopian. In a low GDP and high PE environment, like we are in today, PE is elevated due to a few set of stocks which are typically growth stocks which have been moving the index. However, stocks which offer value haven’t done all that well. While investors look at allocation between large cap and mid cap, one should also look at what percentage of portfolio is between value and growth category.

How should investors build a long-term portfolio in mutual funds?

Investors must do asset allocation and diversify their portfolio across a good set of debt and equity funds. SIP is a good way to build a long term portfolio and staying disciplined is very important. One should not stop SIPs and should add more during volatile phase or market downturns. Having a set of four or five funds in one’s core portfolio is a good starting point.