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Mutual fund investors showing great appetite for assuming risk: Dhirendra Kumar

I find that money flowing into focussed funds, midcap funds, says Value Research CEO.

ET Now|
Last Updated: Aug 09, 2019, 09.30 AM IST
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One would have thought that new investors who came into mutual funds will be running away. But they are getting into riskier category of funds and the scale of flow is quite significant, says Dhirendra Kumar, Founder & CEO, Value Research. Excerpts from an interview with ETNOW.

It is heartening to see investors sticking with their SIPs irrespective of the news flow. At least they are staying put in liquid funds?
Yes, not only liquid funds, equity funds have shown great resilience and mutual fund investors are showing great appetite for assuming risk.

If you look at the kind of money flowing into focus funds, the scale of money coming into midcap funds is quite significant. It is also quite sizable. One would have thought that new investors who came into mutual funds will be running away. But what we are witnessing is quite opposite, investors are willing to assume risk. They are getting into riskier category of funds and the scale of flow is quite significant.

July was an excruciating month for markets. Most of the SIPs have given very disappointing returns in the last two to three-year period. The news flow was bad, the sentiment was poor, the slowdown talk picked up momentum in July but the SIP flows stand at a billion dollar plus or Rs 8,000 crore plus. That clearly is an indication of the maturity of investor. Redemptions have not started in SIPs. Your view ?
It is not a matter of maturity, just that it has happened gradually. In the past, the real problem has been that investors came in a very seasonal way. When investors come in a steady manner. they do not run away. They do not get scared by these opportunities. Sometimes they feel happy that they are buying cheap. More remarkable has been the investors’ appetite for the riskier category. I find that money flowing into focussed funds, midcap funds.

In fact, it is quite surprising that investors are not looking at the steadier funds like multicap which can go anywhere. They are not witnessing the kind of momentum and flows which the riskier categories have, That is quite remarkable.

So what is the message really to investors out there? Should they stick with multicaps or are they better off sticking to largecaps within the equity class?
One message is do not jump around. In any category, if you are there for the long haul, keep calm and carry on. Things will turn out to be okay. That would primarily be the case because if we look at the differential in return of the multicap or a midcap or a small cap fund, on a 10-year basis smallcap might yield 2%-3% more. On a SIP, investing through the lean time it can get enhanced more substantially but on a 10-year basis, on your SIP if you earn 20% or 22.5%, it is a meaningful difference but not dramatic then your accumulation. Even 20% or 18%, 16% returns will please you.

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