Will new investors shower love on mutual funds?

Mumbai: With the recent rush of first-time investors towards direct equities, mutual funds will also benefit going ahead, as these get-rich-quick investors would eventually realise they may need experts to help out optimise their returns.
“I get initiated into the world of stock investing. Then, it depends on my level of understanding, my willingness to learn and my experience,” Aashish P Somaiyaa, CEO of White Oak Capital, said in an interview.

There were a total of 443 lakh demat accounts at the end of July, compared with 395 lakh at the end of January, translating into a 12 per cent rise, data from the Securities and Exchange Board of India showed.

The sudden rise in interest among first-time investors came in the backdrop of the Covid-19 pandemic-triggered lockdown. The novice investors reeling under the pressure of salary cuts and reduced job security amid a work-from-home situation logged on to stock broking apps on their phone to dabble in the equity market.

Somaiyaa was confident that while the initial attention has gone more into direct equities, the tide will soon turn in favour of investments into mutual funds.

“So, then I can always say, look I think this is the right thing to do, but I need some advice. I am not capable, let me just buy a mutual fund,” said Somaiyaa, who just took charge at White Oak Capital after spending more than seven years at Motilal Oswal Asset Management, where he was the Managing Director and CEO.
Last month, private lender YES Bank said White Oak Capital Management, a boutique investment management and advisory firm set up by former Goldman Sachs executive Prashant Khemka, will acquire its mutual fund arm. The bank said the transaction is subject to requisite regulatory approvals from the regulatory authorities.

Currently, retail investors are largely seen flocking to direct equity investing, shunning equity mutual funds.

In fact, August marked the fifth straight month of fall in inflows to equity mutual funds, shows monthly data from Association of Mutual Funds in India (Amfi).

Net outflows from equity mutual funds stood at Rs 3,999.62 crore, compared with Rs 2,480.35 crore outflows in July. Almost all equity fund mutual fund categories saw redemptions last month. Equity mutual funds saw a total inflow of Rs 14,558.20 crore and outflow of Rs 18,557.82 crore.

Somaiyaa believes the Covid-19 pandemic has been a big positive for the investing world in a way, as it suddenly pushed a lot of people to opt for equities, rather than falling for traditionally preferred options such as fixed deposits in an average Indian household.

“I think Covid has only hastened a particular process which was already under way,” he said.

Over the last few years, many fintech platforms have launched discount broking, mutual fund investments, digital wallets and the likes, with many being successful and household names.

“In the last three-four years, there are so many successful fintech or mutual funds platforms digital. They have millions of customers. Even discount brokers or digital brokers made a huge mark for themselves,” he pointed.

“To cut a long story short, there was already a change of habit, change of preferences, generational change which was happening. I think Covid is circumstantial whereby it has hastened up what was already under way,” he said.

While the surge in first-time investors hitting the market is a big positive for the investing world, there is also a dark side to it.

The dark side could be taking the ‘beginners’ luck’ as a norm – a pattern that may be here to stay.

“The only negative is that they should not start thinking that it is as easy as it has turned out to be,” warned Somaiyaa.

“The bad part of it is that your first-time lucky kind of scenario. Whether you bought a mutual fund or you bought stocks, if you started in April or May, incidentally that was like a brilliant time, so beginners’ luck was at full play,” he pointed out.

While the market tumbled as Covid-19 pandemic started spreading in the country and as global markets faltered as well, they soon recovered as central banks opted for easy liquidity policy and pumped in trillions of dollars in the financial markets.

Benchmark Sensex had tumbled nearly 38 per cent to March lows of 25,638.90 points, but has bounced back nearly 52 per cent since then to 38,845.82 points.

“Now, that should not make people complacent,” Somaiyaa said.
Credit: Stocks-Markets-Economic Times

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