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Investment Guide

Market behavior in 2020 and taking advantage of future prospects in 2021

Market behavior in 2020 and taking advantage of future prospects in 2021

The financial markets in 2020 were a reflection of the chaotic year we faced as a country and as humanity. Markets all over the world witnessed a decline of about 30% in the first quarter of 2020 itself. Most sectors saw a sharp dip once the pandemic was in full swing and their stock prices reflected the same. The Sensex touched 26,000 levels, and by extension mutual funds bore the brunt of this drop.

Key changes in the mutual funds industry in 2020

As with any other instrument, mutual funds, too, underwent a lot of crucial changes in the pandemic-hit year. Here’s a recap of the key ones.

  • SEBI introduced a new rule as per which multi cap funds now have to invest at least 25% each in small cap, large cap, and mid cap stocks.
  • A new type of fund called Flexi Cap Funds have been introduced. Flexi cap funds are a market cap agnostic with a 65% minimum equity investment.
  • Starting February 2021, investors will receive the purchase NAV of the day when their money reaches the AMC (asset management company), regardless of the investment size.
  • Introduction of the ‘Very High’ risk category on risk-o-meters by SEBI.

Additional Read: Behavioral biases in investing that you should be wary of

Market revival in 2021

Yet, we have seen an equally sharp revival in the second half of the year and the Sensex is currently close to 50,000, an all-time high. Here are further examples of positive sentiments about the Indian markets in 2021.

  • As per a World Bank Report released early in January, following a massive contraction of 9.6% in fiscal 2020/21, India’s growth has been forecasted at a good 5.4% in fiscal 2021/22.
  • The contraction, which was an effect of the dip in household spending and investments, led to cyclical income loss as well. This was majorly seen in the informal sector. However, recent statistics show a recovery in the manufacturing and services sector. This year, experts expect the rebound from 2021’s low to be countered through subdued growth in private investments because of financial sector decline.
  • The return of the Coronavirus, its new strain, the bird flu, and a host of other healthcare concerns have quite clearly spread water over global economic recovery. However, we can expect it to continue its revival as trade and consumption are improving amidst lenient lockdown policies. The overall market sentiment will be of confidence as the vaccine gradually starts showing its effects. For example, the U.S economy had a contraction estimate of 3.6% in 2020, but is expected to grow at a rate of 3.5% this year. Europe, which was in bad shape as well, is looking forward to a growth of 3.6%.

Additional Read: Safe investments to ride out market volatility

The announcement of the vaccine has helped sentiments recover further and one can expect the revival to continue into 2021. To ride this potential wave, you can consider investing in the various types of mutual funds available at your disposal. Among the many perks they provide, mutual fund investments are driven by these major factors:

1.     Create investment with starting amount as low as Rs. 500

2.     Diversify easily across multiple stocks and other vehicles of investments such as debt, bonds, gold, etc.

3.     Start investing without having to open a demat account

4.     Option to opt for Systematic investment plans (SIP) where mutual fund investments are automatically made monthly

Tata Capital Moneyfy App

To make matters easier, Tata Capital has an app to help kickstart your investments in mutual funds the smoother and faster way. Let us take a quick look into the features provided in the Tata Capital Moneyfy app that ease the process of investing in mutual funds in 2021:

1.   Fully Digitized Process

2.   Portfolios start at Rs. 500

3.   Dedicated Investment Tracker

4.   SIP Calculator

5.   Create Personalized Financial Goals

6.   Compare different portfolios

7.     Avail loans and insurance

8.   Mutual fund scanner

How to do it all

Through the Tata Capital Moneyfy app, you get access to different types of investments such as Large Cap, Small Cap, Mid Cap, Multi Cap, ELSS, Tax saving liquid funds, low risk funds, etc. This is complete with all the necessary information regarding the performance of the funds. Depending on your requirements and based on the risk, you can make your choice accordingly. Moreover, having a goal fixed environment in your portfolio, you can adjust your mutual fund investment investments based on your requirements.

It is evident that mutual funds are one of the must-have ways to create wealth for your dream future. For a smooth investment process for mutual funds in 2021, consider Tata Capital’s Moneyfy app.

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