Tilt portfolio towards large-caps for smoother path amid market volatility

These funds have contained downside risk better than mid- and small-cap categories in past downturns

With the United States and other major central banks rolling back liquidity faster and planning to hike interest rates, and foreign institutional investors (FIIs) pulling money out of Indian equities over the past few months, the market is expected to be volatile. Experts suggest having a higher allocation to large-cap funds in this environment.

Tactical and strategic reasons

Mid- and small-cap stocks ran up more than large caps in 2021. “In the current scenario, where overall equity valuations are frothy, mid- and small-cap stocks are more richly valued than large caps,” says Kaustubh Belapurkar, director-manager research, Morningstar Investment Adviser India.