USA attacks need not terrorise fund investors - Views on News from Equitymaster

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USA attacks need not terrorise fund investors

Sep 13, 2001

Terrorist attacks in the United States should not cause any panic to domestic mutual fund investors. This is what some of the leading Indian fund houses believe. Fund managers’ reaction to the terrorist attacks indicates that if there is an impact, it will be short term and reactionary and the long-term investor should take this as a small blip. If anything, investors should take this is a chance to enter mutual funds, particularly equity funds as markets are at a 34-month low right now.

R Sukumar, fund manager at Pioneer ITI had this to say “The attacks are very sad from a human point of view, but in terms of economic impact, it is not as significant as it is made out to be. My view is that the markets have overreacted to the situation and the markets are distinctly undervalued. So it is time to buy.”

Tridib Pathak, fund manager at IDBI-PRINCIPAL Mutual Fund, opined, ‘The events very much raise the risks of a global recession led by the US. Much depends now on US reaction and on the US consumer. India will be affected mainly if crude oil prices rise beyond US$30/bbl. Being largely a domestic economy, India can prove to be a safe heaven. Direct impact can be on two sectors - IT services (if the trend of offshore outsourcing slows down) and oil sector (higher oil pool account deficit and delay in marketing deregulation). We still think that, net net , these are times to buy equities."

Standard Chartered Mutual Fund’s comments on the impact from the debt perspective:

  • Long term investors should use this correction to invest in debt funds as we believe that our bond markets will remain strong on the underlying liquidity in the local market as well the likelihood of further interest rate cuts across the globe.

  • We do not foresee any sharp fall in prices in the near term and any attempt to "time" the market is not advised. Hence we also do not advise existing investors in income funds to switch to liquid funds.

  • The key risk to our outlook will remain the possibility of any retaliatory action by America on countries in the Middle East. This could lead to pressure on oil prices and hence in the local context on exchange rates. However we see this risk as minimal.

As is evident from the comments of leading fund houses, the impact on domestic and equity markets will be limited and investors don’t have to be terrorised about it. If anything, now is the time to enter funds, both debt and equity, as investors will be entering at lower net asset values (NAVs).

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