Good News! Markets are down!

Sounds quite weird right! The same news is music to your ears when you hear that there is a discount of 50% on Amazon or Flipkart. But the moment it is on the Exchange, there is a panic.

The Nifty 50 is currently trading at 10,585 as on 9th November, 2018. It has fallen from its peak of 11,738 which it touched on 28th August, 2018. The small cap index and the midcap index have fallen by 25.99% and 13.95%, respectively from their January highs. The markets have been extremely volatile and many investors are considering whether they should buy or wait or exit. It is a million dollar question and if we knew the answer to the market directions we would be sitting on billions of dollars ourselves.

Fortunately, there is no right time or wrong time in the market, investing regularly and having patience is the name of the game. Let us analyze a similar scenario from around 10 years ago. The analysis below show why one should start an SIP, irrespective of the market conditions.

We have taken the example of Canara Rob Emerging Equities Fund (G) and its performance in 2008, during one of the worst financial crisis of recent times. The Net Asset Value (NAV) of the fund, as on 15th April, 2008, was Rs. 17.42.  The NAV touched a low of Rs. 7.1 in the month of March, 2009. The NAV fell by almost 60% in a span of 1 year and shook the confidence of the most seasoned investors as well. In fact, for the fund to come back to its original level, it would have to climb nearly 145%. A real tall order!

It took the fund 21 months to reach the NAV of Rs. 17.42. Now, if you as an investor had done an SIP of Rs. 10,000 during this period (i.e. from 15 April, 2008 to 15 December, 2009) you would have enjoyed a staggering return of 53.7% XIRR, despite the fact that the NAV has just returned to the same level.

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Such is the beauty of SIPs in mutual funds. Rupee cost averaging helps gain maximum as one would purchase more units when markets are down.  Falling markets are giving investors an opportunity to start an SIP and make the most of it.

 

 

 

 

Disclaimer: Ventura Securities Ltd has taken due care and caution in compilation of data for its web blog. Information has been obtained from different sources which it considers reliable. However, Ventura Securities Ltd does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Ventura Securities Ltd especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its web blog. The information provided herein is just for the knowledge purpose and shouldn’t be construed as investment advice under any circumstances.

One Comment Add yours

  1. vinay punjabi says:

    It took the fund 21 months to reach the NAV of Rs. 17.42. Now, if you as an investor had done an SIP of Rs. 10,000 during this period (i.e. from 15 April, 2008 to 15 December, 2009) you would have enjoyed a staggering return of 53.7% XIRR, despite the fact that the NAV has just returned to the same level. ( this is really an eye opener wow )

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