Social media is the biggest risk for mutual funds, says Nimesh Shah

MUMBAI: Nimesh Shah, chief executive officer of ICICI Prudential Asset Management, on Thursday said social media has emerged as the biggest risk for India's mutual fund industry. He was speaking at the fourth edition of ETMarkets Global Summit.

“There are so many experts [out] there. It's posing a big risk for the industry," Shah said.

Social media platforms such as Twitter, Instagram, and even Tik Tok before its ban, gained prominence among millennial investors looking for hot tips or guidance on investing. A plethoras of experts on these platforms have amassed an army of followers, who are taking decisions based on mere tweets.

“I had to liquidate 50% of a credit risk fund in four days after that (Franklin) episode due to fear mongering on social media. Now we have to be fully prepared and worry about this herd mentality risk and social media risk,” Shah said.

Platforms such as Twitter have become a favoured ground for investors to look for stock tips, news, and views on a particular stock or mutual funds given the convenience that they lend to users. The trend gained prominence during the lockdown months when first-time investors locked up in their houses turned to social media for information.

On the state of the markets, Shah dismissed the notion that there is “euphoria” in the market, and instead pointed to the “healthy” level of skepticism prevailing among market participants around the current rally in equity assets, which he said is driven by the central banks.

“The market rally can be wider than what it is today. I think there is space for gains in power, infra and metals,” Shah said.

He said his fund house is encouraging investors to undertake systematic investment plans in smallcap and midcap funds as he believes the rally will broaden going ahead in contrast to the concentrated gains seen through most parts of the past three years.

“I think real estate and cyclicals will have a bigger role to play in the index in the next four years,” Shah said.

He also sounded positive on global crude oil prices and said one of his fund of funds has invested in countries that can benefit from higher oil prices.