Don't foresee risk of large-scale SIP outflows, says Aditya Birla Sun Life AMC's Mahesh Patil

Subscribe to enjoy similar stories. Despite stocks, especially small caps, correcting steeply from their highs of September, markets could still undershoot on the downside as investor sentiment remains weak. However, they aren't likely to stay there for long, according to Mahesh Patil, chief investment officer of Aditya Birla Sun Life Asset Management Company Ltd.

Patil cites data indicating that the median stock in the broader market (BSE 500) has fallen more than 37% from its peak, a level at which markets tend to bottom out during a normal correction phase. He also doesn't expect large-scale outflows from mutual fund investors. Data shows that out of the past 20 episodes of market corrections, 17 of them have seen systematic investment plan (SIP) inflows higher than the previous 12-month average.

Edited excerpts: The slowdown in the economy, we believe, is cyclical and not structural. Some of the factors leading to the slowdown are reversing. Firstly, the sharp contraction in budgetary spending seen in the first half is normalizing.

Secondly, in the budget after focusing primarily on addressing the supply-side reforms for the last five years, for the first time there is a shift to focus on the demand side by giving a boost to consumption. Thirdly, the monetary policy is also likely to be less restrictive and is likely to support growth. Read more: Premium products fan hopes for Crompton; Butterfly turnaround vital Post the recent correction in the market, the valuation of Nifty is reasonable and slightly below the 10-year average, which makes it a good entry point for long-term investors.