Nifty50 nears 20,000: Here’s what you should do with your mutual fund investments now!

Wondering what to do with your MF investments as Nifty50 nears 20,000? Get expert insights and actionable tips for optimised investing.

• Nifty50 nears 20,000, so consider asset allocation and stay invested.
• Mid-cap and small-cap stocks outperform, attracting investor interest.
• Experts advise profit-taking for short-term financial goals.
• Stick to value investing and explore IT and pharma sectors.
• Diversify your portfolio with a focus on long-term investments.

Expert recommendations -

For long-term investors, experts advise continuing investments in a staggered manner, even though there is still some upside potential in equities. However, those with financial goals due within the next 2-3 years are encouraged to take some profits off their equity portfolio to safeguard their capital.

What should you do?

1. Stick to your asset allocation: Maintain your predetermined asset allocation strategy, regardless of market fluctuations. Diversify your portfolio across different asset classes to reduce risk.
2. Explore multi-cap and flexi-cap funds: Consider investing in multi-cap and flexi-cap funds through SIPs and STPs. These funds offer balanced exposure to large-, mid-, and small-cap stocks and are managed by professionals for optimum allocation.
3. Avoid over-investing in small-cap funds: While small-cap funds have shown promising returns, remember that they inherently carry higher volatility. Limit your exposure to them based on your risk tolerance and investment horizon.
4. Focus on value investing: Consider diversified equity funds that follow a value investing approach. Additionally, savvy investors may want to explore sector funds with a focus on information technology and pharmaceuticals.
5. Stay invested for the long term: Equities tend to deliver better returns over an extended period. Commit to holding your investments for at least five years to reap potential benefits.
6. Monitor interest rate trends: Monitor interest rate trends as the dollar weakens, anticipating limited US Federal Reserve rate hikes, possibly leading to increased capital flow into India and Nifty50's upward trajectory, while acknowledging the possibility of corrections.

Also Read - Breaking News: Fed To Raise Rates Again, What It Means For Your Investments.

Analysing market trends -

At the beginning of CY2023, the stock market experienced a narrow trading range with a downward bias. However, what followed was a remarkable, broad-based rally. While the Nifty50 rose by 16.74% until July 19, the Nifty Midcap 150 and the Nifty Smallcap 250 outperformed with impressive returns of 22.44% and 25.85%, respectively, during the same period.

Investor sentiment and fund flows -

Investors strongly preferred mid-cap and small-cap equities, with consistent inflows into small-cap equity funds, amounting to nearly Rs 30,000 crore since June 2022. Simultaneously, foreign institutional investors (FIIs) directed their investments towards large-cap and relatively liquid mid-cap stocks.

Valuations and portfolio realignment -

While the Nifty50 and Nifty Smallcap 250 index valuations may not appear overly expensive at first glance, there are pockets of overvaluation and undervaluation that MF managers are actively addressing.

As such, MF managers have already begun realigning their portfolios to capitalise on potential opportunities in the market. Some schemes, like the ICICI Prudential Balanced Advantage Fund, have reduced their net equity exposure to 40% in June 2023, down from 52% in March 2023.

Find the latest articles on mutual funds here.

Also Read - Best Equity Mutual Funds To Invest In India

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.