CEO Speak

The entire month of April has been under lockdown and each one of us has a different experience to share. Hope you and your loved ones are keeping safe. As we step into May, many parts of India will have the lockdown norms being eased out. However, it is of paramount importance that all of us remain responsible for our own safety and keep maintaining the rules of social distancing and hygiene for the well-being of self and others.

On 24th March 2020, India went into a nationwide lock down and since then it has been extended thrice. While a lot of industries across the spectrum have got affected and we are all reinventing our ways of work and communication, the equity and the debt market both showed a lot of action.

Before the lockdown started, the equity market was undergoing a lot of volatility and was down by more than 30%, just from 1st March to 23rd March 2020. However since then, in a period of a month, interestingly, the equity markets have witnessed a modest recovery of around 20% and this happened since the announcement of the lockdown. This just reinforces the fact that one must stay invested and be patient during a market downfall, as the upturn, as and when it happens, could be surprisingly rapid.

The debt market however saw a lot of uncertainty and a flight to safety. We saw many retail investors moving their funds from credit oriented funds to sovereign funds or just out of the debt market altogether. The sovereign fund category saw a surge in investment inflow. Credit oriented fund category also saw a scare as one of the fund houses closed some of their credit funds. This has shaken the confidence of many individual investors. However, please bear in mind that different type of debt funds also carry different kinds of risk and it is importance for all of us to be aware and read up about the same. At the same time debt funds give a very viable alternate investment option for an investor when it comes to asset allocation in fixed income class.

The entire pandemic has resulted in challenging some of the basic beliefs of investing and it’s time one re-balances their portfolios carefully, as per their own financial goals and risk appetite. It is also time to relook at one’s emergency funds, which used to be earlier recommended at 3-6 months of sustenance corpus. But now it may be wise to increase it to 6-12 months of average expenses, having a healthy mix of safety which may have lower returns (especially if you are self-employed). It may be also a good time to relook, if one is adequately covered on health insurance, for self and family.

Investment in equity markets through the Systematic Investment Plan (SIP) mode still remains to be the best way to keep investing. It will only strengthen the confidence of an investor who did not panic and pull out from the falling markets just about 40 days back. As we go back to our investment basics, equity market investments must have a financial goal, which is long term in nature, as the investment objective. Hence one must not be shaken by volatility and be patient. An SIP always gives the rupee cost averaging benefit to an investor across market cycles.

The world and our lives look very different now and how well and swiftly each one of us adapt to the changing times will make us triumphant in our future. Stay Healthy and Stay Safe!

Source: AMFI

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