Sensex falls 1000 points. What should equity mutual fund investors do?

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The BSE Sensex fell more than 1000 points in the first half of Friday. The correction is seen as a direct impact of the detection of a new mutation of the coronavirus in some countries. The market pundits believe that the fall in the global markets is driven by ‘fear selling’. While most market indices fell today leading to a drop in daily returns of equity mutual funds, safe haven metals rose. Gold futures on

were up 0.44% or Rs 209 at Rs 47,630 per 10 grams.

“The new variant of covid that is spreading fast in South Africa and other African countries. There was a warning by WHO which has created fear in global markets. Secondly, there is an anticipation of a sooner than expected rate hike by Fed. Both these news have brought uncertainties in the market. There is a threat to the economic recovery and the risk of rise in cost of capital for global investors,” says Sorbh Gupta, fund manager, Quantum Mutual Fund.

Equity markets have plunged almost 2% amid the emergence of a new, highly mutated Covid-19 variant. EU has announced a temporary ban of flights from South Africa and few EU countries are going under a complete lockdown. There is a fear of the new mutant of the virus derailing the global economy. However, fund managers believe that investors should stay put and not stop their investments at this point.

“Either of the things- Covid and rising rates – were not totally unexpected as the risks hadn’t died down totally. For long-term investors, if the market corrects further, there is an opportunity to invest. For SIP investors, they should continue with their SIPs. This is the best strategy. The outlook for the Indian equity market is positive in the 3-5 year horizon. Take this time to add more to your portfolio,” says Sorbh Gupta.

Experts also believe that the one way bull rally in the equity market has been under pressure over the last one month. FIIs too have been sellers in October and November. Chintan Haria, head-product development and strategy, ICICI Prudential AMC, says that “Strengthening Dollar index indicates a risk off environment, rising inflation print across US and Europe, increasing probability of a hike in interest rates by the US Fed are all factors which are weighing in on the market. Ex India, other Asian markets have already seen a sell-off. Post the one- way rally, we believe the market is likely to see an element of consolidation. Investors should continue with their SIPs and consider hybrid strategies such as multi asset and balanced advantage to make the most of the volatile times.”