During his keynote address in the Moneycontrol Mutual Fund Summit, Ananth Narayan G, whole-time member, Securities and Exchange Board of India (SEBI), pointed out that investors must be made aware of their risk appetite and how to construct an asset portfolio that ties up with that risk, and then be patient with it.
“This is the kind of education that we need going through to people so that they have to rely less on finfluencers (financial influencers) and other charlatans who are giving them ‘get rich quick tomorrow’ kinds of philosophies and inducing them into the market,” he said.
The SEBI whole-time member lauded the efforts of the MF industry, and highlighted that as of March 2020, assets under management (AUM) of the industry stood at about Rs 22 trillion, which almost reached Rs 48 trillion today. Further, the unique investor count in MFs as of March 2020 stood at about 2.2 crore, which has increased to about four crore now, as per the Moneycontrol report.
Narayan highlighted that for the first time, the number of unique participants via SEBI-regulated entities entering the securities market ecosystem crossed the 10 crore milestone in September 2023.
During the address, Narayan emphasized that the key positive outcome of risk acceptance and measurement would be investors appreciating the importance of risk management.
“Suppose you buy one particular stock, which gives you a 15 percent annualised return with a 30 percent annualised volatility. Is that the best investment opportunity? If one is able to understand this, then the efficient market hypothesis will tell that it is not the case. For a 15 percent annualised expected return, you can construct a portfolio of investment assets, which gives you that return at far lower volatility at far lower risk,” he said.
Narayan shared that Nifty’s volatility over the last 10 years was about 18 percent, while individual stocks’ volatility is typically 30-35 percent. “Mutual funds are doing a great job, as they are actually providing a lower portfolio risk and, therefore, reducing the volatility in many ways.”