What happens to your Mutual Funds when there is a market meltdown?

Short Answer

Mutual funds have a wider market and perform slightly less bad than others. Although there are no up turns consequently. Moreover, investors will have to check the bounce ratio to get any returns whatsoever.

Detailed Answer

Last few years has been great going for stock markets in India, we have seen a secular bull run and probably one of the strongest bull runs in the history of the stock market. Consequently, mutual funds also had a gala time with most of them clocking great returns for their investors.

But let’s say tomorrow there is a market meltdown what will happen to the markets , so I thought let me see what happened in past and it can help us understand what might happen in future.

Here is the Nifty plot between Jan 2008- Mar2009


So here is the simple methodology I followed to see who mutual funds behaved during this time period. I picked up 2 funds who have consistently performed in last 10 years and tried to look at their journey during the downturn and post that and how it compared with that of wider market.

The funds I picked up are:

1. SBI Blue chip Fund –> Large cap

2. Franklin India Smaller companies fund –> Mid/Small Cap

Here are the Results

How SBI Blue chip performed during the period?



As you can see clearly SBI blue-chipped mirrored larger market as proxied by S&P BSE 100 during the mayhem of 2008 and 2009, but as the market bounced back it out-performed the market and since 2011 has consistently outperformed the market.

How Franklin Templeton performed during this period?



If you see again Franklin Templeton performed almost similar in the way SBI bluechip, though volatility was little high being a small cap.

Mutual Fund Performance:

So here is the summary:

  1. Mutual funds follow the wider market in terms of down trends and upturns
  1. Good Mutual funds try to perform slightly less worse in down-turn and slightly better in upturns, though it doesn’t always happen
  1. Mutual funds are subject to same risks as wider market and class of stocks they represent
  1. Important thing to look at is how they bounce back .

So, what do you think? What happens to your Mutual Funds when there is a market meltdown? Do share your views.

Tagged With: mutual fundmarket meltdownmutual fundmutual fund performance
Categories: Mutual Funds
Comments (1)

    People start worrying about their mutual funds when there is a meltdown in the market. It can be seen from the graphs that there is just a minor loss. But, it can recovered later when the stocks go up. So, people might be able to worry less when they stay calm and look forward to long term investing.

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