Mutual fund investment:m Mirae Asset Mutual Fund, in its monthly review, said as Indian markets ended the month at a new high, gaining 4% amid volatile sessions ahead of the Union Budget, investors can invest based on their risk profile and continue allocating via SIPs.
Many experts are currently advising investors to consider allocating their funds toward large cap schemes in the near future. This suggestion stems from the expected performance of the large cap category, as the market is moving towards higher valuations. Experts point out that the stock market has reached historic peaks, hinting at a possible rise in volatility. Globally, Indian markets were among the best-performing markets, along with US Dow Jones (+4.4%) and Australia (+4.2%). Hang Seng and Shanghai Composite declined 2.1% and 1% respectively amid the weakness in the economy.
As a result, individuals with a conservative investment strategy seeking steady returns through equity mutual funds to achieve long-term financial goals are encouraged to think about channeling their investments into large cap mutual funds. Before proceeding with the investment, it is essential for investors to undertake a comprehensive understanding of the characteristics of large-cap mutual funds and evaluate the prevailing market conditions to make informed decisions.
Talking about investment in August, Mirae Asset MF said: "We may prefer large-cap oriented funds and hence any fresh allocations can be made in diversified funds like largecap, flexicap and multicap. Hybrid funds, given their flexibility in asset allocation, can also be made part of core portfolio. In thematic, funds may prefer consumption fund for expected mass consumption recovery and BFSI fund given the decent risk-reward."
Best large cap mutual funds for this month are:
> Axis Bluechip Fund > Canara Robeco Bluechip Equity Fund > Mirae Asset Large Cap Fund > Baroda BNP Paribas Large Cap Fund > Edelweiss Large Cap Fund
Investors are also concerned about the valuations within the midcap and smallcap space of the financial market. These mid cap schemes focus their investments on mid-cap stocks, typically representing medium-sized companies. According to regulations set by the Securities and Exchange Board of India (SEBI), mid-cap schemes are required to allocate their funds to companies that fall within the market capitalisation range of 101 to 250.
Mid-cap and small-cap indices were up 5.8% and 4.5% in the month, respectively. Sector-wise, IT, oil & gas, FMCG were up 13%, 10.5% and 9.5%, respectively. Banks, metals and realty indices ended with a minor loss of around 1% each.
Mirae Asset Mutual Fund, in its report, said the Nifty 50 Index's valuation at ~21x FY25E and ~18.5x FY26E is reasonable given the consensus earnings growth of 16% CAGR over FY23-FY26. Earnings growth is broad-based, providing better certainty.
"Over the last 12 months, mid/small-cap indices have outperformed the Nifty 50 by 24/31% respectively, with some sectors particularly amongst industrials trading at a premium. Mean reversion is expected in these richly valued sectors. Overall, we don’t see much deviation in current policy construct and expect earnings momentum to continue," the mutual fund house said.