Faculty News

Prof Nilesh Gupta’s co-authored article titled ‘Mutual fund asset allocation during COVID-19: Evidence from an emerging market’ has been published in the journal Applied Economics (ABDC-A). Prof. Joshy Jacob, Finance & Accounting Area, Indian Institute of Management Ahmedabad, Gujarat, India; Prof. Balagopal Gopalakrishnan, Finance & Accounting Area, Indian Institute of Management Ahmedabad, Gujarat, India, are Prof. Gupta’s co-authors. The paper examines the investment decisions undertaken by Indian Mutual Fund managers in the face of extreme uncertainty brought about by the Covid-19 Pandemic. The study revealed that funds favoured firms with lower risk, higher financial flexibility, and larger size during the early months of the pandemic. The preference for relatively low-risk firms, which reverses later, suggests a reallocation towards safer assets. Funds also preferred growth firms to value firms as the latter with greater invested capital are more vulnerable to the shock. Institutional investors also favoured group-affiliated firms throughout, reflecting their lower crisis vulnerability. The study found that the stocks preferred by funds during the pandemic outperformed others in the long run. The paper highlights critical firm characteristics that impact mutual fund asset allocation during extreme uncertainty.