2008-like crisis won't hit Indian MFs: RMF

Aug 12 2011, 15:35 IST
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SummaryForget the world, says Reliance MF to investors, buy stocks instead on this great opportunity.

Amid growing concerns over the impact of bad news from the US and Europe on Indian markets, Reliance Mutual Fund has said the recent correction provides an attractive share buying opportunity for investors.

The India's largest fund house has also asserted that a doomsday scenario like the one experienced during the global financial crisis of 2008 was unlikely to return to Indian markets, as the variables are very different this time around.

In a research note, Reliance MF said: "In the current volatile environment, investors have started extrapolating the current context and speculating about the repeat of the doomsday scenario of 2008."

However, the current environment is quite different and most variables now are far superior in comparison to those prevailing at that time, it said.

It may be recalled that the Indian mutual fund industry was almost wiped out by the global financial crisis in 2008 because it could not handle the redemption pressure by fleeing investors and instead had to be bailed out by authorities - the problem was caused by the Indian mutual funds industry which was worsened by the global meltdown.

"From an investor standpoint, we think notwithstanding the events/risks in the next few months, if one invests in equities now, in the ensuing period, one can expect relatively better returns over the following 12-18 months," it noted.

In the last few days, markets in India and abroad have fallen sharply amid mounting debt worries in the US and Europe.

The announcement of the US debt rating downgrade by ratings agency S&P last week further added to the market concerns.

Reliance MF said Indian markets have been under pressure for many months due to domestic macroeconomic concerns, as well as negative news flow on the political front.

"The recent global uncertainty has added to the market's woes. The US downgrade has probably acted as the last straw to break the back of the Indian investor's confidence," it said.

"Moreover, post the global financial crisis, the relative resilience of many emerging markets economies, in general, and India, in particular, has led to increased investors' faith in these markets," the fund house noted.

It said that global growth was being driven by developed markets in 2007-08, while emerging markets have emerged as the biggest source of growth in the last four years.

"Though not completely immune, the world economy is far less vulnerable to the US and other DM (developed markets) growth scare," it said.

Reliance MF further said

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