The wild swing in the equity markets have scared investors and the trading volumes have plunged. Mutual funds are showing early signs of slowdown in inflows with the SIP stoppage ratio hitting a new high.
The uncertainty in the global markets still persist as the impact of trade tariff war kicked-off by the US President Donald Trump is yet to play out.
Aashish Somaiyaa, CEO, WhiteOak Capital AMC, told businessline that pain in the recent market downfall was felt more by the direct equity market investors than those who invested through mutual funds.
The growth of direct equity investors have been tremendous with multiple direct platforms and fintechs emerging along with the traditional broking firms, he said.
The new demat account opened had touched 18 crore and 13 crore unique equity investors.
“Comparatively growth in mutual funds was still graded. The MF industry has nine crore SIPs and only less than 6 crore unique investors,” he said.
Due to lack of proper research, direct equity investors ended up owning all the hot cyclical stocks and these stocks in railway, PSU, defence, infrastructure and energy are all down 40-60 per cent.
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Interestingly, after knocking 50 per cent of their portfolio, these direct investors are now focusing on mutual funds, said Somaiyaa.
Mutual funds itself were not immune to the recent market fall with portfolio of leading equity schemes plunging on an average 15-20 per cent.
When MF portfolios are down so much, he said investors confidence gets shaken and inflows starts tapering down but unlike earlier days redemptions are not heavy as nobody wants to book loss due to their confidence in Indian economy.
Unfortunately, investors are stopping their SIPs when they should be putting more, he said.
“Personally, I believe if someone is looking to create wealth in next 18 months, they should start investing in equity from the current level,” he said.
However, Somaiyaa said the pain in the market may prolong for next two-three months due to the developments in the US such as the tariff war and inflation concern.
“So we are already in a downtrend and feeling the heat of the US impact. When we have a negative momentum, it can go down further our market,” he said.
However, Indian equity markets valuation will turn attractive given the government infrastructure spending and RBI accommodative stance. This will lead to reversal of FPIs flows and lift the equity markets, he added.
