Mutual fund investor? Alert! To panic or not? Here is what IIT Hyderabad study has indicated

A study on Mutual Funds by the Indian Institute of Technology-Hyderabad said investors need not panic as long as the net asset value (NAV) of their investment does not fall drastically during the present quarter.

Prof. Badri Narayan Ratha, faculty of the institution has analysed the impact of COVID-19 pandemic on the performance of the Indian Mutual Fund Industry.

In the wake of the COVID-19 outbreak, volatility will continue to grip the Mutual Fund industry because of investor concerns over the ongoing turmoil of Indian economy, the study said.

"Although stimulus packages announced by both the Ministry of Finance and Reserve Bank of India (RBI) may encourage the MF investors to continue investing through systematic investment plan (SIP), at same time it poses uncertainty about their future cash flows and exposure of investment to equity assets."

"Nonetheless, there is no need for Mutual Fund investors to panic as long as the net asset value (NAV) of their investment drastically does not die out in this ongoing first quarter of FY 2020-21," it said.

Investors with a continuous flow of income who are aiming at long-term investment horizons should not pull out their money from mutual funds irrespective of volatility in the equity and debt funds in the short term.

Instead, the small investors may shift from the Systematic Investment Plan (SIP) to Systematic Transfer Plan (STP) in the medium term to mitigate the risk amid the COVID- 19 outbreak, Badri Narayan Rath of Department of Liberal Arts, IIT-Hyderabad, said.

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Mutual Funds have become the investment vehicle for propelling wealth and widening the choice of Indias middle class.

However, the current catastrophe amidst Coronavirus- induced nation-wide lockdown has created havoc for both Mutual Fund investors and the Mutual Fund Industry.