Mutual Funds: Planning to invest this Diwali? These are the sectors investors can explore

If you are planning to invest in mutual funds anytime soon then remember that Diwali is a good time to make a new beginning. There are a number of market veterans who may advise you against investing at the current valuations which are arguably quite steep. Nifty50's current P/E (price/earnings) ratio is 22.8.

However, like any other time, there are a few sectors & themes as well as stocks which are still being sold at attractive valuations with a high upside.

And if you are still too conservative to place a huge bet, you can consider investing in the small doses to avoid the prospect of huge correction in the immediate future. One of the best bets is to opt for systematic investment plans (SIPs) which enable you to get exposure to financial markets at varied price points across time durations.

Systematic Investment Plan is a great tool to invest in a staggered manner allowing investors to invest small amounts periodically i.e. weekly, monthly or quarterly. Investors understand that mutual funds offer risk management better than direct equity. They also know that SIP provides the benefit of Rupee Cost Averaging.

In other words, if you want to start investing now, you don't need to loosen your purse string right now. You may invest in small doses of ₹1,000 in each scheme you decide to take exposure into.

For instance, if you zero in three mutual fund schemes focussing on IT, infrastructure and pharma then you may perhaps decides to invest ₹3,000 in each of these schemes for the next 12 months via SIPs. At the end of the end of one year, you would have invested a total of 1.08 lakh during the year. This way, you can stagger your investment over a period of time and make investment across different price points.

In Sep 2024, SIP inflows touched an all-time high of ₹24,509 crore. This was 52.78 percent higher than the corresponding data of 2023.

However, the question on which the jury is still out is -- which sectors to invest in?

Which sectors to invest?

If you are wondering which sectors to invest, it is recommended to look beyond the obvious. Chokkalingam G, Founder, Mumbai-based Equinomics Research Pvt Ltd, recommends five sectors where retail investors can consider investing. "One can invest in the mid and small IT stocks, domestic pharma companies, old private sector banks and a few FMCG stocks, some of which are available at attractive valuations. One can also invest in the tyres stocks since the prices of rubber -- a key input in tyres -- have declined by ₹63,000 in the past two months," he says.

He also points out that despite the market being overpriced, some stocks and sectors are still available at attractive valuations and investors -- under expert guidance -- can consider investing to make the most of it.

“Investing in diversified mutual funds is better instead of going for specific sector-wise investments because sectors are cyclical in nature, so investing in them will be a concentration of risk and should not be mapped with the financial goals. Still, some sectors seem promising such as IT, Banks and NBFCs and metals,” says Preeti Zende, a Sebi-registered investment advisor and founder of Apna Dhan Financial Services.

Rahul Singh Chief Investment Officer (equities) of Tata Mutual Fund recommends investors to consider pharma and healthcare as sectors that continue to show positive earnings momentum, with companies performing better than expected. "The healthcare segment, in particular, has been performing exceptionally well," he told Livemint recently.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.