The rising spread of coronavirus has led complete lockdown in India. All companies except those in essential services have told employees to work from home. Even mutual fund houses are operating with minimum staff in the office. Last week, Association of Mutual Funds in India informed the market regulator SEBI the likely difficulties in mutual fund daily operations. However, MF houses are doing their best to ensure seamless services amid trying times.
Business Today reached out to mutual fund houses on what implications lockdown may have on them and thus on your investments:
If you are running systemic investment plans (SIPs) in mutual funds and do not want to do much in the current market scenario, you shouldn't bother as the operations will get back to track within few weeks. Only those who wish to make redemptions, switches, new investments or profile or account related changes should take note of operational part of mutual funds. In case you have used digital platform you can do most of the activities unhindered as before. However, if you are an investor still doing physical transactions, you may face some inconvenience.
Also note there could be delays in publishing net asset value (NAV). "As long as telecom networks are fully functional we don't see any issues in servicing our investors' requirements. Investors are urged to use website and mobile app for transactions. We have also recently passed an addendum to enable investors to e-mail their transactions to us and we will have them processed," says Aashish Somaiyaa, MD & CEO, Motilal Oswal Asset Management Company. Note that it can be done only with the registered e-mail id.
Nippon India Mutual Fund has informed its customers about digital alternatives. The fund house has empowered its distributors with an internal platform - NIMF Business Easy Platform - that can be accessed round the clock. "Investors can get in touch with their distributors who in turn will advise them on suitable digital mediums to transact or meet their service requirements. They can also initiate transactions on behalf of investors after latter approves the transaction using weblinks triggered on SMS or e-mail," says Sundeep Sikka, ED and CEO, Nippon India Mutual Fund.
L&T Mutual Fund had been testing remote access of its various critical functions for the last few weeks to ensure smooth functioning of all teams across India. It launched two new mutual funds - Nifty50 and Nifty Next50 index funds - on Tuesday in line with what it had planned before coronavirus-led carnage disrupted daily operations. This was done despite most employees working from home, which shows how IT systems and processes are evolving for good.
"The markets today, with a steep correction since January 2020, provide an opportune platform for investors to invest in a well-diversified portfolio of fundamentally strong, highly liquid and well-known companies. With advanced technology along with company's well-defined structure and robust processes, the company was able to launch the funds without any hiccups," says Kailash Kulkarni, Chief Executive, L&T Mutual Fund.
Dealing with redemption pressure
Nippon India MF and L&T Mutual Fund say they are not witnessing any unusual redemptions in the equity funds. Fixed income funds, however, are seeing comparatively higher redemptions in Nippon India MF. "Some of these could be due to year-end considerations," points out Sikka of Nippon India MF.
He advises investors to give utmost importance to liquidity. "If an investor is running low on liquidity in his overall portfolio, he or she should redeem from funds and create the required liquidity, regardless of market levels. On the other hand, if the investor has sufficient cash to tide over these uncertain times, could consider fresh allocation, while being prepared to withstand further volatility for some more time to come."
Fire sale is going on, says Somaiyaa. "If you are fearful then you will not be able to take advantage of it. At 12,000 Nifty, everyone wanted to be a fund manager in their own right, at 7,500 Nifty, now don't become a risk manager," he advises.
If you have been careful in selecting quality MFs in your portfolio then there is no reason for you to make an exit. Therefore, unless you need money urgently, it's better to continue with the investment. The industry is well prepared to protect your interests even as the virus-led crisis prolongs.