Market Crash Giving Buy Opportunity to Mutual Fund Investors, Say Analysts

Benchmark equity indices were trading sharply lower on Thursday, with the Sensex dropping over 1,800 points and the Nifty50 slipping below the 25,250 mark. The decline was in line with losses in other Asian markets as investors curbed their risk appetite amid the escalating Middle East conflict.

The escalating tensions in the Middle East, coupled with the implementation of changed norms for trading in index derivatives, weighed on market sentiment and investors are worried whether they should book some of the profits or instead gradually increase their SIPs.

Market Correction An Opportunity For Mutual Fund Investors?

Analysts say the market correction provides investors an opportunity to purchase more units at a lower price.

Should You Stop Your SIPs?

Investors with a long-term horizon should strongly consider topping up their SIPs during market dips, as this strategy can significantly enhance long-term returns.

Swapnil Aggarwal, Director, VSRK Capital, said: “In the aftermath of a market correction, mutual fund investors often face a critical decision, to stop their SIPs (Systematic Investment Plans) or to view the downturn as a valuable opportunity. Historically, market correction tend to be short-lived, frequently providing a chance to buy mutual fund units at lower prices. By continuing SIPs during such downturns, investors can take advantage of ‘rupee-cost averaging,’ accumulating more units when prices are reduced. This approach not only lowers the average cost per unit but also positions the portfolio for greater returns when the market eventually recovers, softening the impact of short-term volatility.”

While the immediate impact of a market correction may lead to declines in the NAV (Net Asset Value) of mutual funds, disciplined investors can view this as a moment to reassess their strategies. Focusing on long-term financial goals, while adopting a proactive approach, allows investors to turn market volatility into opportunity, paving the way for future growth and resilience, Aggarwal added.

Another mutual fund advisor advises investors that topping up of SIP should not strain their financial situation and if they have limited liquidity and don’t want to take unnecessary risks, should continue with regular SIP investments.

“If you have additional funds and a long-term investment horizon, topping up your SIPs during market downturns can be beneficial. Buying more units at lower prices can enhance returns when the market recovers. Ensure that topping up your SIPs does not strain your financial situation. It’s important to maintain an emergency fund and avoid overcommitting to investments. If you have limited liquidity and don’t want to take unnecessary risks, regular investments through SIPs can help reduce the impact of market fluctuations,” recommends Adhil Shetty, CEO of Bankbazaar.com.