'Lump sum investment for hybrid, large cap funds...': Motilal Oswal's suggestion amid market correction

Motilal Oswal Private Wealth (MOPW) has issued a recommendation for investors to pursue lump sum investments in Hybrid and large-cap funds. This guidance comes in response to the recent market corrections which have seen large-cap valuations fall below their 10-year average.

The advisory reflected the firm's strategic outlook amidst ongoing consolidation in the Indian equity markets, influenced by global economic uncertainties, US tariffs, and a robust dollar. "During the current phase, it is advisable to tread with caution by adopting a strategy that is balanced and resilient," the report highlighted, stressing the importance for investors to align their portfolio strategies with their individual risk appetites.

In its March 2025 Alpha Strategist report, MOPW underscores the necessity of strategic investment decisions in the current volatile market conditions. While advocating for lump sum investments in Hybrid and Large Cap funds, the firm recommended a more staggered approach for Flexi, Mid, and Small Cap funds, particularly over the next six months.

This staggered deployment is suggested to be accelerated should further market corrections occur. Despite recent corrections, Mid and Small Cap stocks continue to trade at a premium when compared to their long-term averages.

“During the current phase, it is advisable to tread with caution by adopting a strategy that is balanced and resilient,” the report stated.

The report noted that the correction has brought large-cap valuations (such as those in the Nifty 50 index) below the 10-year average on a one-year forward price-to-earnings (PE) basis. In contrast, mid and small caps remain at a significant premium, suggesting a disparity in pricing corrections across different segments of the market. This insight underlines the advisory's rationale for differing investment strategies tailored to various fund categories.

From a broader economic perspective, the report suggested that India's economy remains stable, bolstered by recent governmental measures aimed at stimulating consumption and supporting growth. However, corporate earnings in the third quarter of FY25 have not been sufficient to uplift market sentiment. MOPW projects that a clearer understanding of the economic headwinds will emerge in the first half of the year, advising investors to be patient and selective in their equity allocations. The advisory is set against the backdrop of an Indian market characterised by consolidation and external economic pressures.

Investment in largecaps

According to PL Wealth, the wealth management arm of PL Capital, the Large Cap Mutual Funds category, consisting of 32 schemes with a total Assets Under Management (AUM) of Rs 3,38,637 crore, registered a modest return of 3.08% over the past twelve months. Unfortunately, the category saw a decrease of 3.86% in the last month and a significant drop of 12.22% over the past six months. 

In the Large Cap category, the Motilal Oswal Large Cap Fund-Reg(G) stood out with an impressive 20.06% return over the past year. For Large and Mid Cap funds, the Invesco India Large & Mid Cap Fund(G) delivered an 8.85% return. Leading the pack in the Flexi Cap Funds category was the Motilal Oswal Flexi Cap Fund-Reg(G) with a return of 13.67%, thanks to Niket Shah's expertise and an AUM of Rs 11,171.69 crore. In the Mid Cap category, the Motilal Oswal Midcap Fund-Reg(G) took top honors with a return of 16.62% and an AUM of Rs 23,703.68 crore.