Investors should utilise the present downturn in the markets for making long-term investments as it is unlikely that the markets would offer many such windows, according to Mr Prashant Jain, Executive Director and Chief Investment Officer of the HDFC AMC that manages the HDFC MF.

While the Indian economy is groaning under the weight of negative factors, he felt that that the problems faced by the economy at present were ‘not insurmountable'.

Above average returns

Writing on ‘its tomorrow that matters', Mr Jain, one of the most respected voices in the investment world , said it was investment made during adverse times rather than during good times that fetched good returns. This was because during bad market times only the stocks tend to ‘trade below fair values' and investment made during tough market conditions gave ‘above average returns'.

Referring to the funds inflow during different market cycles, the famed investment Guru said during the FY2003-2008 (Jan) period, the BSE Sensex boomed from 3,000 to 21000 levels (before retracing to 15,600 levels in March 2008).

In this period the equity MF collections soared from a mere Rs 118 crore in FY03 to Rs 53,000 crore in FY08.

But during the market downturn when the P/Es also went down (during FY09-12), the cumulative inflows into the equity funds have been a negative — Rs 6,000 crore. Simply put, the investors pumped in more money when the markets were overheated but they pressed the sales button when the markets were down.

Mr Jain pointed out that during Oct 2007-March 2008, when the BSE Sensex was hovering around 20,000 levels, the net sales of (inflow into) equity funds was Rs 41,142 crore.

But when the markets dived between October 2008 and March 2009 (when the Sensex dipped below 10,000), the MF (equity fund) sales was a negative Rs 162 crore.

He said this was not an isolated instance in investor behaviour.

From 1988 to 1992 when the Sensex moved up 10 times from 400 to 4,000 levels and the P/Es were at 40 times, a Mutual Fund equity scheme collected nearly Rs 4,000 crore (he did not name the fund). He said at today's prices, this should be more than a staggering Rs 20,000 crore. This investor mayhem was witnessed during the IT boom and also during the frenzy that real estate sector witnessed in 2007.

His advice was that investors should utilise the current downturn in the markets as an opportunity ‘to invest more into equities' so that when the good times return, they would benefit from their stock picking.

He cautioned that in an investment horizon of say 30-40 years, ‘it is unlikely that the markets will provide many such windows' and pointed out that during the past two decades, there have been only 3-4 such windows. He implored the investors to seize the opportunity.

ryn@thehindu.co.in

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