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Volatility in MF industry to continue due to Covid: IIT study

G Naga Sridhar Hyderabad | Updated on April 21, 2020 Published on April 20, 2020

In the wake of the Covid-19 pandemic, volatility will continue to grip the mutual fund (MF) industry because of investor concerns over the ongoing turmoil of Indian economy, according to a study conducted by a faculty with the Indian Institute of Technology.

The study, conducted by Badri Narayan Rath, professor, Department of Liberal Arts, IIT, Hyderabad, found that the Covid-19-induced nationwide lockdown has created a ‘havoc’ for both mutual fund investors and the industry.

“Although stimulus packages announced by the Ministry of Finance and RBI may encourage MF investors to continue investing through systematic investment plan (SIP), at the same time it poses uncertainty about their future cash flows and exposure of investment to equity assets,” said Rath.

“Investors with a continuous flow of income who are aiming at long-term investment horizons should not pull out their money from mutual funds irrespective of volatility in the equity and debt funds in the short term,” he added.

Instead, small investors may shift from the Systematic Investment Plan (SIP) to Systematic Transfer Plan (STP) in the medium term to mitigate the risk amid the Covid-19 outbreak, the study pointed out.

Nonetheless, there is no need for MF investors to panic as long as the net asset values (NAV) of their investment drastically does not die out in this ongoing first quarter of FY21, it added.

The research has taken into consideration the period between 30 January to 15 March 2020 as Covid-19 low intensity phase and from 16 March to 15 April 2020 as Covid-19 high intensity phase and compares the performance of the Mutual Fund industry.

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Published on April 20, 2020
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