 "Illustration: Binay Sinha")
Mutual fund investment strategy: After falling over 1,800 points month-to-date (till May 9, 2024), the S&P BSE Sensex has regained some lost ground, having risen 583 points in four sessions.
On the National Stock Exchange, the NSE Nifty50 has recouped 243 points during the period.
The reprieve in the stock markets comes amid improved global sentiment with the US consumer inflation cooling off more-than-expected in April, raising bets for more than one rate cut in calendar year 2024.
Mutual fund investors, meanwhile, have been rejigging their portfolios amid a surge in equity volatility. Last month, systematic investment plan (SIP) registrations jumped 48 per cent month-on-month to 6.4 million, while closures surged 42 per cent to 3.3 million.
Data provided by Association of Mutual Funds in India (Amfi), large-cap and flexi-cap schemes have seen a surge in inflows and folio additions since the start of calendar year 2024, coinciding with the dip in small-cap and mid-cap fund inflows. READ MORE
While this is the trend among incumbent mutual fund investors, what should new mutual fund investors do? Is it time to start SIPs now? Or should one wait for more corrections?
Business Standard spoke to MF experts to decode the investment strategy at the current juncture. Here's what they suggest:
Harshad Borawake, Head of Research & Fund Manager, Mirae Asset Investment Managers:
First time investors can enter via SIP route amid choppy markets. SIPs aid in annulling negative effects of market volatility through consistent periodic investments over a long term.
That apart, SIPs offer rupee-cost averaging which allows investors to purchase more units when prices are low and fewer when they are high, thereby averaging the cost of investments.
This is a great time to opt for Hybrid Category. Under this, one can take advantage of elevated yields due to higher interest rates to aid in wealth generation for longer term.
For investors with medium-to-high risk appetite, investing into Aggressive Hybrid Funds, which have higher equity allocation in the range of 65 per cent to 80 per cent, and the rest in debt, is advisable. One can also look at Multi Asset Allocation Funds, which have allocation to four asset classes namely equity, debt, arbitrage and commodity.
Low-risk appetite investors, meanwhile, could look at investing into the Equity Savings Fund Category, which have relatively lower net equity allocation, in the range of 20 per cent to 45 per cent. The rest is arbitrage, and debt.
As arbitrage & Debt has relatively higher allocation than net equity, these funds can provide better experience during uncertainty in markets.
DP Singh, deputy managing director & Joint CEO, SBI Mutual Fund
Mutual Funds provide solutions across the spectrum for investors. Hybrid Funds like Multi Asset Allocation Fund are one of the easiest ways by which investors can achieve their asset allocation needs as these funds invest in equity, fixed income, gold, silver etc, while those who would like a small allocation to equity can choose conservative hybrid funds.
Akhil Chaturvedi, ED & Chief Business Officer, Motilal Oswal AMC:
Volatile markets are a good time to start SIPs, and we would encourage first-time investors to start their SIPs now.
We would recommend considering flexi-cap or multi-cap schemes, as these diversify investments across different market cap buckets, based on market conditions, and the fund manager's insights. For low-risk investors, balanced advantage funds or hybrid funds are also good options.
Sunil Subramaniam, MD and CEO, Sundaram Mutual:
India's economic outlook is very robust and, over the next decade at least, nominal GDP growth should be in the teens. The stock market should outperform that over the long-term and, hence, this is the ideal time to create wealth through SIPs.
Medium-to-high risk appetite investors may consider a mix of broader market funds such as Flexicap, Large & Midcap, and Multicap with a little overlay (5 to 10 per cent) of Mid and small cap funds.
Low risk appetite investors, meanwhile, may look at MultiAsset Allocation funds that have a significant exposure to Gold given the low correlation of gold to equities.
Sandeep Bagla, CEO, TRUST Mutual Fund:
Indian economy is expected to grow at a relatively faster clip, and Indian companies may benefit from factors like demographic advantage, rising incomes, premiumisation of consumption etc.
We would advise investors to spread their investments systemically over a period of time and hold for a period of 3-5 years to overcome any short term volatility.
