Mutual funds are feeling the tremors on Dalal Street. With the stock market down over 20 per cent from its highs, many retail investors — some of them first time — are not renewing their systematic investment plans (SIPs) in equity schemes or considering pulling out. Such a reaction does not come as a surprise though mutual funds and the financial advisor community could have played a bigger role in keeping retail investors’ confidence in equities alive this time.
Investor behaviour has been mostly consistent for decades. When the sentiment is weak, they stay out of markets or sell. Similarly, when the market is in a raging bull run, they end up accumulating a lot of stocks (or equity scheme units) around the peak. After the market falls, many of these investors are left holding duds for a long period, leaving them disillusioned. They promise never to return.
