Your equity mutual funds gained 1-3% in a single day. Is it time to invest more?

You might have already heard that the stock market gained by over 2.5% yesterday. Did you know that your equity mutual funds also made 1-3% in a single day? Well, most equity mutual funds made money yesterday, with banking funds gaining the most. For details, see the below table.

How much did mutual funds make yesterday?

1-day returns (%)
Banking schemes 3.07%
Large cap schemes 2.37%
ELSS 2.19%
IT Funds 2.18%
Flexi Cap Funds 2.14%
Large & Mid Cap Funds 2.05%
Multi cap funds 1.90%
Mid Cap Funds 1.70%

Source: Value Research Now, you would be wondering what contributed to these gains in all these mutual funds. Well, you should first remember that the market fell by over 1,000 points on Monday as the US Fed spooked investors with very hawkish statements. Investors became extremely concerned about the possibility of steeper interest rate hikes and recession. Yesterday, the same investors became adventurous and were confident that things won’t go badly. Mutual fund managers say all factors remain the same and these wild fluctuations only underline those problems that continue to haunt the market.

“We have relatively seen strong growth and a healthy corporate earnings cycle as positives but a worrisome current account deficit and high inflation as challenges. Both the Indian stock market and currency have significantly outperformed emerging markets in general and this high base may mean that further material outperformance is difficult in the near term. In the long term, fundamentals of the Indian economy are much more attractive than most emerging markets,” says Manish Gunwani, CIO-Equities Nippon India Mutual Fund.

We have said earlier that mutual fund investors should not get swayed by these sudden falls and gains with increasing frequency. Sure, you would be swayed by those comments about it is time to buy more. All you have to do is to go back to your basics. Sitting on cash and buy and sell strategies are meant for traders. You have another full time job and you can’t track the market and make investment decisions based on market moods every hour.

Once again, remind yourself about your financial plans. Tell yourself that you are investing in equity mutual funds to achieve your long term goals. Do you have money you can invest for the long-term? Only then you should pay attention to the comments about buying more. Most average salary earners won’t have extra money to invest for a long term every time the market falls by 1,000 points.

Having said that, this is time to be extra cautious. ETMutualFunds has been telling readers that this year is going to be tricky. So play it safe and tread with extra caution. Remember that this is not the time to be adventurous.

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