Image Credit:Jack English

Indian Mutual fund investors need not panic after seeing the blood shed in the US markets. This kind of crisis is not unusual in stock markets. It is only in times like this wheat gets separated from the chaff.

Market has seen even worse days in 1930s. Only if you withstand the crisis will you be able to make money. Indian fund managers strongly believe that our economic fundamentals are strong and in another 3 to 4 months this uncertainty will be gone.

Compared to developed economies our fundamentals, regulatory system are much stronger.  While Capital Adequacy Ratio in developed countries is 3% to 4%, our banks has CAR of more than 10%. Crisis in American markets will not affect Indian markets severely for long.  At most markets might come down a bit as liquidity might be a problem.  Our Economy is just bouncing back.  Inflation is coming down, Oil prices are coming down, Economy is registering a growth rate of 7%, and companies coming out with stronger bottom lines all indicate this.

Long term investors should just hold on to their positions and those who are entering the market now, don’t put all your money at once.  Many people think of investing heavily when the market falls heavily.  But it is really difficult to guess where the fall would stop.  Instead choose SIP route; the choice of an intelligent investor.

People who have put money in DSP Merrill Lynch equity funds, DSP Merrill Lynch top 100 fund through SIP might be worried as Merrill is now taken over by Bank of America.  Also those who have put money in AIG and JPMorgan Mutual Fund also might be worried a lot.  Already investors have lost money in the last six months as markets performed poorly due to Inflation and crude oil issues.  Now the fall of American investment banks have rubbed salt in the wound.  Those who have put money with international fund names are nervous as they are falling down like a pack of cards.

Merrill Lynch’s merger with Bank of America, nationalization of AIG, Morgan Stanley searching for a buyer … with all these happenings, investors who have put their hard earned money into these are asking fund agents and fund houses as to what would happen to their investments.

Few fund managers have stated that Indian mutual fund investors need not panic about what’s happening as all the fund houses have invested money in Indian companies itself.  Incase of mergers only management changes hands and nothing will happen to the funds of the investors.  Just because Merrill is merged with Bank of America DSP Merrill Lynch investors need not worry.  In fact even before Merrill merged with Bank of America it has sold its Mutual fund business to another international firm Blackrock.  DSP Merrill Lynch might be renamed to DSP Blackrock in future.  Except for a change tin the name nothing will happen to the investments made.

Coming to AIG and Morgan Stanley, only the ownership has changed and not the management who actually manage the business.  So investors can continue investing in these without any fears.

Will AMFI or SEBI able to help fund investors?

SEBI doesn’t provide any protection for the investments made in Mutual Funds.  It’s the responsibility of the investor to know the pros and cons of putting money in Mutual funds.  Most importantly they must understand that in stock markets it is possible to loose even the principal amount at times.  Unless you put your money in a capital guaranteed fund, you are never assured of your capital.

Asset Management companies act as a custodian for our money. Association of Mutual Funds of India (AMFI) or Securities and Exchange Board of India doesn’t give any guarantee for our money. Only those who are ready to take this risk must invest in mutual funds else bank deposits is the best place for them.< –>

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