With uncertainty gripping the world with important external events like US-China Trade War, US-Iran faceoff and internal events like slowdown in economy in India in terms of Auto and FMCG sales, it makes sense to invest in the equity market via mutual funds systematically, thereby enabling the investor to take advantage of the Lows and Highs faced by the market. The below-mentioned mutual funds cater to different categories like Large Cap, Mid Cap, Small Cap, Debt and Gold which indirectly provides the investor to different investment avenues across asset classes. The mutual funds mentioned below will provide stability and performance considering the current market scenario.
1. Axis Bluechip Fund-Direct Plan – Growth (Large Cap)
Considering the current uncertain market environment due to factors such as economic slowdown coupled with lower consumption, additional surcharge on Foreign Portfolio Investors etc, it makes sense to stay with funds having exposure to large caps constituting Bluechip companies which will always provide a shield to the portfolio. Axis Bluechip Fund is one of the outperformers in this regard wherein it has almost 81% investment in large caps with a major portion of investment in the Financials space, which include stalwarts like Kotak Mahindra Bank, HDFC Bank, Bajaj Finance, indicating investments in high asset quality companies.
With respect to investments, it has almost 18% in cash indicating the cautious approach by the Fund Manager due to high valuations in the market and minimal investment opportunities. The fund has outperformed its peers and the benchmark index peers by a fair margin. The scheme has provided returns of 14% and 13.4% in the past three and five years, respectively. The fund is suitable for conservative investors with the scheme strategy to allocate maximum funds towards companies with dominant market share, pricing power and good asset quality.
2. Kotak Standard Multicap Fund-Direct Plan – Growth (Multicap)
Multicap Funds provide investors an option with exposure to companies across Large, Mid, Small cap, hence offering diversification in the current market conditions and providing an opportunity to generate additional returns due to exposure to Midcaps and Small caps. The fund is one of the distinguished performers in the Multicap space with the funds providing returns of 11% and 15% over the three and five-year period, respectively, and consistently outperforming the benchmark index.
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The fund has almost 70% of its investments aligned towards large-cap companies, hence mitigating the volatility risk and almost 20% allocated towards Mid and Small caps which assists in generating additional returns due to the growth potential of companies in the Mid and Small-cap space. The fund is suitable for any investor looking for investments across different market capitalization companies.
3. L&T Midcap Fund-Direct Plan – Growth (Midcap Fund)
The current market downturn has led to negative returns for most of the companies, impacting the midcap space which faces high volatility along with high growth companies. L&T Midcap Fund is one of the funds wherein the strategy is to pick the high growth companies which have the potential to dominate the specific sector. The fund has almost 63% in Midcap companies and 20% in Small-caps, indicating the clear focus of the fund manager in terms of investing in Mid-sized companies which will provide superior returns once the economy picks up and market upward movement begins. The fund has returned 14% over a five year period and outperformed its benchmark index-Nifty Midcap 100 TRI. Investors with risk appetite and with belief in India growth story can utilize the current market downturn opportunity to invest in the high-quality fund which will provide substantial over the long term horizon. We would advise the investor to allocate around 20% of the funds in the Midcap space.
4. SBI Gold Fund-Direct Plan (Gold)
Investment in gold provides an alternative investment avenue and protecting the portfolio in case of a market downturn. The rationale of suggesting investing in gold is that during a market downturn, gold is the asset class which provides the investor a safe haven due to lack of investment opportunities. Considering today's market scenario wherein we have almost 75% of bonds in the world trading at negative interest rates and uncertainty in equities markets due to internal factors such as economic slowdown and external factors such as trade war wherein China reduces buying US Treasuries with increased investment in gold, hence it provides the perfect opportunity to hedge the portfolio against market downturn. Investors with a cautious approach towards the world market can consider investing in Gold funds. We would recommend investors to allocate 5-10% of the funds in gold.
5. HDFC Gilt Fund-Direct Plan-Growth (Debt)
The Budget proposal considering the aspect of issuance of Sovereign bond coupled with economic slowdown indicates that the interest rates will not rise in the near future. With additional rate cuts in the offing and equity-based mutual funds providing negative returns, Debt provides an alternative investment avenue looking to hedge the portfolio against the market downturn. HDFC Gilt Fund provides an opportunity for investors due to its investment in Government securities, thereby allocating funds to an ultra-safe option wherein chances of default is almost NIL. With the risk of corporates defaulting and the corresponding impact on Debt funds with exposure to corporate bonds, the risk has increased for the Debt fund, hence investors would prefer investing in safe haven of Government securities along the similar lines wherein globally countries invest in US Treasuries. We would recommend investors to allocate 10-15% of the portfolio towards Debt with HDFC Gilt Fund as one of the options.
(By Vijay Kuppa, Co-founder, Orowealth)
(Disclaimer: The mutual funds mentioned herein have been recommended by Orowealth. Please consult your financial advisor before investing in any of these funds.)