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Mutual fund investors are not cashing out

MUMBAI: A section of the retail investors in India is showing signs of maturity. Despite a sharp slide in the leading indices, several investors are not rushing to redeem their investments from equity mutual funds. This is a clear departure from earlier habits when retail investors hurried to redeem when markets showed a sharp southward movement. In fact, some are considering investing more since prices of a large number of good quality stocks are down, fund managers and financial planners said.

In September, there were net inflows of about Rs 8,000 crore in equity funds, of which about Rs 7,000 crore was through the systematic investment plan (SIP) route and the balance as the lump sum investments, said A Balasubramanian, chairman, AMFI, the mutual fund industry trade body.

MF distributors, financial planners and advisers said that investors who are in for a long haul are not rushing to exit in October even though the Sensex has lost 1,850 points or 5% in four sessions.

However, high net-worth investors (HNIs) are putting in redemption requests in debt funds, mainly because of the sudden multiple downgrades of IL&FS and the subsequent default by the company that is majority owned by government institutions, they said.

“Investors who have longterm goals, with a time horizon of more than five years, are continuing to build their corpus through SIPs. Such investors should continue this strategy,” Balasubramanian, who is also the CEO of Aditya Birla Sun Life MF, said. Investors should also continue to invest in debt funds as long as their investment horizon is 3-5 years, he said.

The positive change in the investor behaviour could be because of the maturing of the personal finance industry. According to Mukund Seshadri, co-founder, MSVentures Financial Planners, advisers have helped clients to understand that since they have their long term goals in place, they should not sell in a hurry. A number of times, the advisers have to deal not only with their clients, but also their family members who may have panicked because of the sharp slide in leading indices, he said. The most common message to retail investors is “if you don’t need money in the current situation, short-term volatility in the market is not going to matter to your long-term portfolio,” Seshadri said.

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