Stay calm, say fund managers

Fund managers say they’re trying to soothe investor nerves with the stock markets seeing a surge in volatility, due to events at home and abroad.

On Wednesday, the BSE exchange’s benchmark Sensex plunged 1,600 points (six per cent) before trimming losses. Thursday saw a near two per cent move up; it ended one per cent higher. On Friday, a decline of 2.7 per cent as the Sensex plunged about 700 points and the National Stock Exchange’s Nifty50 breached the 8,300 mark.

More important, many frontline individual stocks are seeing sharp gains and losses on a daily basis, amid news flow such as the US elections, the demonetisation move at home and a sharp rise in US bond yields. Tata Motors, Tata Steel, ICICI Bank and State Bank of India have seen rises and falls of more than five per cent. The Sensex has lost 1,100 points or four per cent in November.

So, money managers are being bombarded for advice on whether to stay put or take money off the table. Their uniform message to investors is to remain unperturbed by the spike in volatility and to instead use steep falls, as on Wednesday and Friday, as buying opportunities.

“In the near term, there will be volatility. Investors need not panic. They should stay invested and use the corrections as opportunities to purchase additional units. Due to the demonetising of ~500 and ~1,000 currency notes, in the near term there will be a slowdown in consumption which will be reflected in the numbers next month. We have to see how long this impact remains,” said Sunil Singhania, chief investment officer, equities, Reliance Nippon Mutual Fund.

Fund managers have also advised investors to look at fixed income products to make the most out of the demonetisation move. Says S Naren, CIO at ICICI Prudential MF: “Demonetisation has improved the chance of an interest rate cut to earlier than expected. It will lead to money coming back into the banking system. There is a possibility of much lower yields in the medium term. We recommend investors invest in fixed income immediately, as returns are expected to be front-ended.”