Radhika Gupta, MD and CEO of Edelweiss Asset Management in an interview with CNBC-TV18, emphasised the need for investors to maintain a balanced split between large, mid, and small-cap mutual funds.
Traditionally, the prevailing wisdom suggested that large-caps should form the core of a portfolio, with mid and small-cap mutual funds added for diversification. However, the dynamics of the Indian economy are evolving rapidly, and Radhika Gupta believes that large-cap funds alone may no longer offer an accurate representation of the country's economic landscape.
"In current market conditions, investors need to have a fairly balanced split between large, mid, and small caps. There was a school of thought that said equity investing meant the core of your portfolio was large cap and you had a little bit of flavour of mid and small cap, but if you look at the composition of the economy today and the decade forward then the large cap will not give you an accurate representation of the Indian economy.
Many sectors and themes that will emerge will be from the mid and small-cap space. So you need a portfolio that is large, mid and small-cap oriented. So multi-cap mutual funds as a category works really well for most investors and you can supplement it if you want with additional mid and small-cap exposure," Gupta said.
The latest data from AMFI for September 2023 confirms the evolving trends in mutual fund investments. While equity mutual fund inflows slipped slightly on a month-on-month basis, they remained robust at Rs 13,857 crore.
A noteworthy trend observed was the continued preference for mid-cap and small-cap funds, which continued to attract investments. In contrast, large-cap funds experienced outflows, reflecting the changing investment landscape.
Systematic Investment Plan (SIP) inflows for September 2023 reached an all-time high at Rs 16,042 crore, signifying a substantial increase from the previous month's Rs 15,814 crore.
This surge in SIP investments indicates that investors are increasingly recognizing the potential of systematic and disciplined investment strategies, even in a slightly uncertain market environment.
Radhika Gupta also shared her perspective on the ideal number of mutual funds for investors. According to her, most investors would benefit from holding between 8 and 12 mutual funds in their portfolio.
This recommended allocation includes 4 to 5 core categories of funds, with a mix of equities, international exposure, and debt. Additionally, Gupta suggests including two funds from different asset management companies (AMCs) within the same category for further diversification.
Watch accompanying video for entire conversation.
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