Active Stocks
Fri May 24 2024 15:59:27
  1. Tata Steel share price
  2. 174.80 -0.37%
  1. NTPC share price
  2. 374.85 0.68%
  1. State Bank Of India share price
  2. 828.60 -0.45%
  1. ITC share price
  2. 436.10 -1.16%
  1. Power Grid Corporation Of India share price
  2. 318.50 -0.39%
Business News/ Money / Personal Finance/  Is it the right time to redeem small and mid-cap mutual funds? 3 experts weigh in
BackBack

Is it the right time to redeem small and mid-cap mutual funds? 3 experts weigh in

With broader market indices hitting new highs every other day, investors and financial experts are paranoid of the probable market correction, particularly in small and mid-cap categories. What should they do now? We explain it here

Investment experts believe that small and mi-cap stocks are headed for a steep correction in the near future Premium
Investment experts believe that small and mi-cap stocks are headed for a steep correction in the near future

As the benchmark index Nifty 50 has risen considerably in the recent past, some investors have grown circumspect of investing further in the wake of higher prices, while the others are falling prey to what is known as ‘irrational exuberance’.

Nifty50 spiked by around 11 percent in the past six months alone, while S&P BSE Sensex jumped by a little less than 10 percent during the same period.

Consequently, a section of investment advisors recommends investors to get cautious and refrain from going overboard. They are of the opinion that investors should invest in a staggered manner for the next few months via systematic investment plans (SIPs). Another rational investing advice is to opt for portfolio restructuring that entails redemption of small & mid-caps to invest the proceeds in large cap funds.

Returns given by mutual funds (category-wise)

Category               1 year returns (%) 3 year returns (%) 5 year returns (%)
Small cap                              28.3736.1922.30
Mid Cap                                              25.7129.5018.53
Large Cap                           15.1220.1112.25

(Source: MorningStar; annualised returns as on Oct 2, 2023)

“The small and mid-caps are already overpriced and one can expect a significant correction in the near-term future. It is recommended to do profit-booking in these categories and invest the proceeds into large caps," says Sridharan S., a Sebi-registered investment advisor and founder of Wallet Wealth.

Expressing a similar set of arguments, Chokkalingam G, founder, Equinomics Research & Advisory, says, “There is a lot of volatility around the corner on account of state elections later this year, and general elections early next year. Therefore, it is the right time for investors to book profits in small and mid-cap categories. It is also recommended to increase the asset allocation in large caps."

On the other hand, Deepesh Raghaw, a registered investment advisor (RIA), says that small and mid-caps, by their very nature, are volatile and should, therefore, draw the investors who have an appetite for them.

“Small and mid-caps are highly volatile and you should invest only if you have an appetite for them. And as far as the future projection is concerned, no one knows what would happen. However, investors should choose the allocation that they can live with. If a position in a category bothers you as an investor, then it means it is time for you to trim your position, " he says.

 

sip-calc-widget
Here we share a few points of distinction between mid cap and small cap stocks
View Full Image
Here we share a few points of distinction between mid cap and small cap stocks

You are on Mint! India's #1 news destination (Source: Press Gazette). To learn more about our business coverage and market insights Click Here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 04 Oct 2023, 09:05 AM IST
Next Story footLogo
Recommended For You