Mutual funds serve as investment vehicles designed to mitigate risk by diversifying across various asset classes. Notably, the aftermath of the initial COVID-induced market crash in April 2020 has witnessed a substantial surge in retail investors, subsequently elevating trading volumes and influencing market prices. In evaluating the impact of NIFTY 50 on mutual funds, it is discerned that the correlation is relatively weak. Optimal mutual fund investments are characterized by a low portfolio beta coupled with above-average returns, ideally falling within the beta range of 0.5 to 1. Funds displaying minimal fluctuations may not respond significantly to market downturns but also lack notable reactions to market upswings. Amid economic or national crises, investment products with a beta value near 0 emerge as favorable choices. The study, spanning from 2019 to 2023, encompassing the COVID era, reveals that numerous mutual fund houses have strategically realigned their investments toward safer asset classes to mitigate substantial losses. This strategic shift has implications for retail investors, influencing their investment outcomes during the observed period.
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Bhargava et al. (2024) studied this question.
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