Simply Save | How should mutual fund investors handle stock market volatility

The stock markets closed on a positive note on Wednesday (December 1, 2021) with the S&P BSE Sensex ending one percent higher at 57,684.79 points. But stock markets have been showing weakness in last few days with concerns building up around US Fed tapering down its stimulus measures and the emergence of Omicron, the new Coronavirus variant. 

This has led to volatility in stock markets. The S&P BSE Sensex is still down six percent from its highs. The last year’s market crash after Covid-19 outbreak is still fresh in investors’ minds and also the sharp rally that followed. But, is the market rally starting to fade out? Should investors be taking profits or stay put?

There are varying opinions on which way the markets might go. Foreign brokerages have been withdrawing their bullish stance on Indian stock markets. Recently, Credit Suisse in its note said that supportive monetary policy has helped in better-than-expected economic and corporate earnings recovery for India, but Indian markets seem to have already factored in a large part of this recovery.

Analysts are worried about Indian market’s valuations now being the most expensive vis-à-vis other emerging markets. Broking houses -- Nomura and UBS -- have also raised similar concerns. 

After last year’s strong recovery, the Indian stock markets are up another 20 percent for the current calendar year. 

The sharp run-up in stock markets have translated into huge inflows into equity mutual fund schemes (net inflows of Rs 59,978 crore for CY21). Retail investors have shown higher risk-appetite and participated in the slew of IPOs (including those of start-up companies) that were launched this year. To tap into these positive sentiments, mutual funds have also been launching several new fund offers (NFOs), crossing the 100 NFOs-mark in CY21. 

In contrast to foreign brokerages, domestic mutual fund managers still remain bullish and believe that there are still attractive investment opportunities in the Indian stock markets. 

In today’s Simply Save Podcast, Tarun Birani, founder and chief executive officer of TBNG Capital Advisors talks with Moneycontrol’s Jash Kriplani, on what should investors be doing with their equity mutual fund investments with so many market views floating around.