The last quarter of 2020 saw an interesting trend reversal in mutual fund inflows

The year 2020 was a nightmarish one - on more counts than one. A joint report by the International Labour Organisation (ILO) and the Asian Development Bank (ADB) is just made available. It reveals that nearly 41 lakh youth lost jobs in India due to Covid-19. Consequently, people broke in financial as well as emotional terms. Many mutual fund investors had to stop their systematic investments plans (SIPs). Mutual fund inflows via SIP plummeted to a 21-month low in June 2020. According to AMFI, the monthly SIP contribution during the month stood at Rs 7,917 crore. The month-on-month drop in SIP contribution began in April 2020 and continued till September 2020. Those hit hardest withdrew funds from the markets and stopped their SIPs. The good thing is about 30 per cent of users, who had stopped their SIPs, think that it was only a temporary pause.

Consider this. As markets recovered towards the end of the year, the average SIP size of Rs 4,300 per SIP which had fallen by around 5 per cent in March bounced back to pre-Covid levels. Investor confidence returned and those who had paused their SIPs, resumed them. SIP inflows for December last year at Rs 8,418 crore, recovered to almost at pre-Covid levels. Direct inflows returned to the pre-Covid levels in May itself. In fact, there was higher than pre-Covid level inflows in direct mutual funds in May.

There are actually rays of hope. After a roller coaster ride, assets staged an impressive recovery. In fact, some assets delivered mesmerising returns. Benchmark index, BSE Sensex gained 16 per cent in 2020, gold rose by 24 per cent, 10-year government bonds rose by 10 per cent and the world's largest crypto currency soared by over 300 per cent. 2020, for all practical purposes, has been a year of small caps and mid caps. These categories of stocks bounced back after almost three years of gloomy performance. BSE Smallcap 250 and BSE Midcap 150 soared by 26 per cent and 25 per cent respectively, in the year gone by. While momentum stocks did well for investors in India and the US, value stocks disappointed. The last quarter of 2020 saw an interesting trend reversal.

Another very interesting phenomenon has been that 2020 saw a higher participation from women investors. Women participation actually increased from 19 per cent to 27 per cent on various apps, in the last 10 years. This is good news as research suggests women make better investors as they tend to be more patient and more goal-based. Mind you that the personal wealth management space in India has exploded over the last 12-18 months with several platform and apps gaining traction to serve the mass and mass affluent communities.

With the vaccine against Covid-19 having been rolled out, this year is expected to be marked as a year of great recovery. Scientific research and trials is already on to put an end to the pandemic. There could be a logical correction led by inflationary pressures as much as excess liquidity being taken back. That's what experts feel.

If one looks at things holistically, the year gone by, has been both different and unique in nature. While we saw unforeseen economic disruptions, we also recorded the maximum number of new investors coming on board. Many think that the new investors are knowledgeable, want to own their investing future and are conscious about the risks. Quite significantly, the pandemic has not only highlighted the importance of a comprehensive health cover but also emphasised the need for a systematic investment plan to safeguard one's future.