The gloom pervading the markets has forced many a fund manager to push the Sell button in a hurry.

The markets have tanked significantly over the past few days. The BSE Sensex has fallen 5% from 4,159 points in October 4 to 3,947 points in October 10. What is even more disconcerting is that yesterdays 100+ point fall in the Sensex came in the backdrop of an impressive 134% (year on year) growth reported by Infosys, the darling of Indian bourses.

As the selling spree continues and stock prices head southwards, growth fund net asset values (NAVs) are going to take a hit. As more and more software companies look set to declare impressive results, its anybody's guess where the markets are headed over the following days.

However, one thing seems sure. If investors decide to exit from growth funds in a big way and fund managers are forced to book losses in a falling market, we could witness a situation today, very similar to the one in March, when funds had serious problems meeting redemption requests of over Rs 25 bn.

Investors who have entered growth funds for the long term should be able to take the market slide in stride. However, investors with a shorter investment horizon (of less than 6 months) have some cause for worry.

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