SIP Investors: The Backbone Of The Markets Should Not Get Disillusioned

A lot maybe running in the mind of mutual fund investors. For the last 2-3 years, they have been the backbone of the stock markets, especially through the Systematic Investment route. However, with the stock markets constantly falling, they may tend to get easily disillusioned, if the pain due to the coronavirus gets prolonged.

Rightly so...

To be honest, if you examine the returns from some of the largecap mutual funds over the last 2,3 and 5 years, there is nothing much to write about. Most of the funds have generated returns of 4, 5, 6 and 7 per cent on an annualized basis.

If you take out a few like Axis Bluechip Fund, Canara Robeco Bluechip Fund, BNP Paribas Largecap Fund and LIC MF Largecap Fund, the returns from the host of other 25 to 30 schemes has been rather ordinary.

If on an ongoing basis, the markets continue to slide, there could be a time when investors would start getting worried. If the returns start moving into the negative, that would be worrisome. The year to date returns for almost all of the largecap schemes has been negative. Another 5 per cent for the benchmark indices from here would surely be a concern.

Maybe right to increase SIP amount

If the markets shed another 5 per cent from here, it may not be a bad idea to start looking at increasing the SIP amounts. From a 2-3 year perspective the markets could be bought into.

Benchmark indices have already corrected more than 10 per cent from peak levels, thanks to the caronavirus scare. In fact, it looks like the virus scare is unlikely to go away anytime soon as infections continue to mount.

Those who are looking to invest in the markets from a long term perspective may want to increase their SIP amounts. Overall, this must be the most difficult investment phase, given the way the Sensex has fallen from levels of 42.000 points to the current levels of 37,500 points. If the pain persists, we may see individuals withdrawing their SIP amounts.

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