CEO Speak

The equity markets were hit by some bumpy ride in September after a good run in the earlier 3 months. The GDP data and some key indicators like fiscal deficit showed its impact on the markets owing to the COVID crisis. Frontline indices Nifty50 & Sensex marginally declined by 1.2% and 1.4%, respectively.

While large caps showed a decline, there are some sectors which moved positively. Technology and Pharma sectoral funds were the predominant outperformers in the mutual fund space in the month of September. Pharma stocks rallied after a major domestic drug maker inked a deal with Russia’s sovereign wealth fund to conduct a clinical trial and distribution of Sputnik V (COVID-19 vaccine) in India.

IT was the best performing sector, gaining by almost 11%. Healthcare, Consumer Durables, Tech and Auto rose between 1-8%. Oil & Gas and Bank were the worst performing sectors, falling between 6-10%. However, some fundamentals of investment rules should prevail - investors should invest into sectoral funds only if they fall into the aggressive risk profile and understand the risk associated with investment in sector funds. One of the key trends that we all must take note of is the emergence of passive funds. Today passive funds, whether they are ETFs or Index funds, are very small components of the industry but showing very promising signs of growth. So clearly, passive funds will find a prominent product category in India.We believe this will grow at 15% plus over the next 5 years as more and more people start having some portion of their overall portfolio in passive funds.

While these market trends remain, one must be a little conscious of the fact that the COVID crisis has got the economy into unprecedented territories and investors in general must be patient as the industries will take their time to get back to full steam. While you must not get carried away by the sudden downward trend of the equity markets, you must neither get swayed by sudden positive sentiments.

We at L&T Mutual Fund have always taken pride in our internal processes and risk management internal guidelines which we have followed since inception. SEBI has been trying to put a number of measures in place to regulate both debt and equity investment governance of fund houses. The dependence on our stringent internal rating system rather than any external ratings ensured that we did not have to make any radical change to our processes even on the debt side, and its business as usual for us.

All in all, we firmly believe in the fundamentals of investment principles which must be based on financial goals, risk taking capacity and asset allocation. Some amount of uncertainty in the markets is given in such a global crisis, the resilient investors will stay invested and continue with their SIPs even at a retail level as the long term goals of an individual does not change basis a crisis like this pandemic. If one had started an SIP with building the retirement corpus in mind, there is no reason why he should get shaken by a few volatile weeks when the long term goal is over 15 years’ time horizon. For, there is no other asset class which has historically given better returns than the equity markets. With falling deposit rates the markets remain an attractive long term investment option.

Disclaimer – The article (including market views expressed herein) is for general information only and does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. The article provides general information and comparisons made (if any) are only for illustration purposes. Investments in mutual funds and secondary markets inherently involve risks and recipient should consult their legal, tax and financial advisors before investing. Recipient of this document should understand that statements made herein regarding future prospects may not be realized. Recipient should also understand that any reference to the indices/ sectors/ securities/ schemes etc. in the article is only for illustration purpose and are NOT stock recommendation(s) from the author or L&T Investment Management Limited, the asset management company of L&T Mutual Fund (“the Fund”) or any of its associates. Any performance information shown refers to the past and should not be seen as an indication of future returns. The value of investments and any income from them can go down as well as up. The distribution of the article in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of the article are required to inform themselves about, and to observe, any such restrictions.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.