The coronavirus pandemic is considered to be a ‘black swan’ event where equity markets skidded almost 40 per cent in just a matter of two months. Though it recovered quite quickly and substantially, the volatility still persists as represented by India VIX.
The above graph of India VIX clearly shows how volatile markets have been since year till date (YTD). Hence, many investors are fearful of it shooting up and losing all their gains. This can also be seen from the mutual funds’ inflow and outflow data published by the Association of Mutual Funds in India (AMFI) on a monthly basis. As on July 2020, equity mutual funds collectively witnessed outflows of Rs 2,480 crore as compared to inflows of Rs 241 crore in the previous month.
As can be seen, amid a rise in volatility, investors started locking in gains by moving out of equity mutual funds. While there was so much of volatility and lack of return in the equity market, debt funds gave returns in double-digit. Therefore, the question arises if investors should opt for an all-debt portfolio? In this article, we have attempted to answer this question and also suggest what should be your course of action.
As we know, markets appear to be under a cloud of uncertainty ever since the beginning of the pandemic. It has sent markets around the world reach levels not observed since the global financial crisis of 2008. The S & P BSE Sensex and Nifty 50 crashed by 38 per cent, following the strong correlation with the indices globally. Amid this, the total loss of market cap was an astounding 27.31 per cent.
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