The recent volatility in the stock markets has caused concern among investors, leading to a significant drop in trading volumes. Mutual funds are also showing signs of a slowdown in inflows, as the SIP stoppage ratio has reached a record high.
The ongoing uncertainty in global markets, particularly driven by the trade tariff war initiated by US President Donald Trump, continues to impact investor sentiment.
According to Aashish Somaiyaa, CEO of WhiteOak Capital AMC, the recent market decline has affected direct equity investors more than those who invest through mutual funds. The rise of direct equity investors has been notable, with various platforms and fintech firms entering the market alongside traditional brokerage firms.
Despite the growth in direct equity investment, the mutual fund industry still lags behind. This is evident in the fact that mutual funds have nine crore SIPs and less than six crore unique investors.
Many direct equity investors, lacking proper research, ended up heavily invested in volatile cyclical stocks, particularly in sectors like railways, PSUs, defense, infrastructure, and energy, which have seen significant declines of 40-60%.
Interestingly, after experiencing significant losses, many direct investors are now turning their focus to mutual funds. While mutual funds have also been impacted by the market downturn, leading equity schemes have seen an average decline of 15-20% in their portfolios.
Despite the decline in MF portfolios, investor confidence remains relatively stable, with inflows tapering down rather than heavy redemptions. However, there has been an increase in SIP stoppages, though Somaiyaa believes that investors should consider increasing their investments in equities at the current levels for long-term wealth creation.
Looking ahead, Somaiyaa anticipates further market volatility in the next two to three months, driven by external factors such as the trade war and inflation concerns. However, he remains optimistic about the Indian equity market’s potential, citing government infrastructure spending and the RBI’s accommodative stance as factors that could attract foreign portfolio investments and support market growth.
