We consider ourselves to be rational human beings. But even the smartest of us tend to panic. Worse, we later defend our dim-witted decisions as logical and sensible. Given the information we had at that time, we theorise, what we did was the best we could. There were few choices, and we had to act in real time. Any delays from our side could only worsen the situation. Moreover, we couldn’t sit back, and watch our wealth being eroded, minute-by-minute, day-by-day.
Nothing epitomised this panicked-rationality better than the mayhem in the mutual funds market. As the Indian stock indices tumbled by almost 40 per cent by March 23 this year, the crazed investors ran away in herds. In June, they pulled out a massive ₹13,500 crore from the equity-oriented schemes, an increase of more than 75 per cent compared to the previous month. The overall monthly inflows in such funds in June were the lowest in the past four years.
Massive outgoes were witnessed in the multicap equity funds, followed by the large-cap ones. A similar trend gripped the hybrid funds, which invest in a mix of equity and debt; arbitrage funds proved to be an exception. The mid-cap category survived the bedlam, but monthly inflows fell to ₹36.70 crore in June. Ironically, as the markets recovered, the assets-under-management of the equity funds grew by 8 per cent between May and June this year.
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