Friday, 22 June 2012

Equity and mutual funds....

Mutual Funds industry is in a tricky situation. This industry experienced a very positive inflow from the span of 2003-2008.However since 2008 this industry has seen a jerky ride.
FY 12 and FY 11 lost 1.6 million and 1.8 million equity folios respectively. The inflow was more into debt funds like the FMPS, liquid funds and short term MIP’s. Also the gold etf’s saw a major surge.
Although the top MNC’S are making a fair share of their profits, the retail investors over the span of last four years have gained nothing. We are at lower levels than what it was in the 2007.
Currently there are many issues in India and globally that is crippling the equity segment in general. The negative IIP ‘S, high inflation and low GDP numbers are the drivers of the negative sentiment in the equity markets.
Globally the Euro zone is on tenterhooks. Events like the Greece elections, G20 Meetings will help derive a conclusion. It becomes imperative for the Euro to sustain for the positive trend to begin. Also the QE3 in the US is an important event. The employment figures there look dicey.
These factors will have an impact but a temporary one. However the good news is that at this point the market looks fairly priced as all the negatives have been factored in. In the past few months the market has corrected significantly.
Also interest rates have peaked out, gold imports have been reduced and global crude prices have corrected quite a bit. The Rupee has seen 20% erosion in the year. There’s a strong buzz that RBI may further cut rates.
All these factors have placed a good possibility that the equity markets are bottoming out. The equity markets may gradually pick up from here on.
In turn the investors can be more positive about the equity mutual funds. If interest rates further slash and debt funds are unable to beat inflation, the obvious route is equity mutual funds.
The latest news declared that equity Mutual funds ended in a green led by positive market rally. All the funds in Equity and Balanced category advanced witnessing no decline. The same trend was followed even by sectoral categories. None of the funds in any category witnessed any decline.
Knowing there’s a good possibility the markets will be a better and if the funds are systematically chosen and actively managed, the equity mutual funds are definitely a good arena to invest in.

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