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Moneycontrol.com >> Message Board >> View Messages >> Market Analysis - Fundamental View
   You are here :     Moneycontrol     MMB    Market View      Market Analysis - Fundamental View                         Most active discussions of 2006 , 2007 & 2008
Will Sensex hit rock bottom? (1)   22-Jul-08 13:26Tracked by (0)  
Posted by:   zoombusiness on ( 22-Jul-08 13:26 )
The reason being that mutual funds' equity holdings are less than 4% of the market capitalisation and the retail investors exposure to markets directly and through the mutual funds route is less than 5% of the total retail investments in 2006-07. These figures show the potential for retail investors' money that can be routed into stock markets with the right policy.

The way mutual funds are sold in India can at times result in a situation where investors erode their wealth. For instance, the markets are lower by around 35% in 2008. We analysed the monthly gross inflows into equity funds in 2008 against the Sensex levels (monthly average). And the results are not very surprising. Investors put the highest amount of money in equity mutual funds in January when the market was at its peak. As the markets started falling, the gross inflows started dwindling. And by June, when the markets were lower by almost 35%, the gross inflows were at the lowest at Rs 3,998 crore.

Redemptions as a percentage of gross inflows were at the highest as markets started falling. The average of the April-June period was as high as 77%. So, the magic words were Buy High and Sell Low, which should have been exactly the opposite. This shows that the need of the hour is rational decision-making by retail investors with a long term perspective and not to get misguided by short term volatility.

Stock markets and equity mutual funds are vehicles for long-term wealth creation. Retail investors have to invest regularly in a disciplined manner and be patient for the results. As the Indian economy's fundamentals continue to be in a reasonably good shape, irrespective of the high oil prices and inflation, India is certainly not heading for an economic recession which is different from an economic slowdown from higher historical levels. And the two quarters in the year 2008 has moderated many of the unrealistic expectations from India's stock markets and its economy.

So, keep investing and remember the most elusive factor for the market now is finding a bottom.et-

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