INVESTING IT WISELY

Mutual fund investors 'buying low & selling high'

In the past few years, mutual fund (MF) investors have used corrections in equity markets to accumulate MF units at low prices, shows ICICI Direct report.

Indian investors seem to be gradually mastering the art of equity investing. Instead of staying away from equities during phases of market downturn, they are seen to be increasing their investments during such periods.

According to a study by ICICI Direct, there have been at least three instances in the last four to five years when investors have increased their equity investments in MFS when the market was going down. For example, average monthly inflows into active equity schemes rose almost 5x between the November 2021 and June 2022 period (when the market was declining from the all-time-high achieved in October 2021) as compared to the preceding months.

They also seem to be timing the exit right. In the last three months (August to November), when the market has touched new peaks, average monthly inflows have declined to ~5,900 crore from ~15,500 crore during the November 2021 to June 2022 phase.

However, this 'buy low and sell high' strategy has not always worked for them. "While this approach of lower investment at higher levels have been rewarding, investors got it wrong during the recovery in the year 2020 and 2021 as markets continued to rally while investors booked profits early into the recovery (sold off early since July 2020 while Nifty50 continued to rally till the first major correction in February 2021)," the report noted.