Indian mutual funds currently have about 7.44 crore SIP accounts through which investors regularly invest in Indian mutual fund schemes, says Palka Arora Chopra, Director, Master Capital Services.

In an interview with MintGenie, Chopra said that when analysing fund performance, investors should consider not only point-to-point performance but also the fund’s rolling returns relative to its benchmark, as well as risk-adjusted performance.

Edited Excerpts:

What are your projections on the future trajectory of the markets? In the upcoming year, which sectors do you anticipate experiencing higher levels of volatility?

6.5% economic growth is expected in Fiscal year 2024-25 making India one of the fastest-growing economies in the world. The Indian Economy is expected to outgrow China’s economic growth because of the high foreign investments expected in 2024.

Three cuts in interest rates in 2024 by the FED are expected, however economists expect that RBI will not cut interest rates from 6.5% till the end of the 2024 fiscal year. The market is expecting that in the first half of 2024, the pace of economic growth will depend on election outcomes & consumer spending, and in the second half of 2024 will depend on business and investment-related activities.

The market is expecting that the ruling government will come back but if the results come opposite the investor’s expectation, then we will see a downside in the Indian markets. Banking, financial services, IT, automobiles, infrastructure, capital goods, realty, and renewables sectors are likely to remain in focus.

When considering investment in any fund, what duration or degree of underperformance should not cause concern for investors, and at what juncture should they assess their fund’s performance?

When investing in shares, you should expect to see ups and downs in the markets in the short term. The volatility of the fund will be determined by its category and market conditions. A mid-cap fund, for example, will be substantially more volatile than a large-cap fund. When analysing fund performance, investors should consider not only point-to-point performance but also the fund’s rolling returns relative to its benchmark, as well as risk-adjusted performance.

AMFI data highlights an increased number of SIP inflows into mutual fund investments. Does this highlight a growing inclination to stock market investing to create wealth?

Indian mutual funds have currently about 7.44 crore SIP accounts through which investors regularly invest in Indian mutual fund schemes. From ₹11,305 crore in December last year to an all-time high of ₹17,073 crore in November 2023, the SIP book has expanded steadily. Despite global worries, the Indian equities market has performed well, owing to the country’s underlying good fundamentals.

A Systematic Investment Plan (SIP) is a method for progressively growing and saving your money. Rather than investing a large sum of money all at once, you make tiny, monthly investments. Investors now recognize the value of using the SIP channel to invest with discipline and one can spread the investment over time without worrying about timing the market.

Many investors consider rebalancing their portfolios at the beginning of every year. How often do you advise in favour of portfolio rebalancing?

Portfolio rebalancing assists you in keeping your preferred asset allocation in line with your investing goal and risk tolerance. Reviewing the whole investment portfolio and returning each asset class’s percentage allocation to its initial ratio is known as portfolio rebalancing. Investing horizon, risk tolerance, and portfolio size are some of the variables that determine how often the portfolio is rebalanced. One can opt –Time time-based rebalancing, threshold-based rebalancing, or event-based rebalancing.

During these alternating bear and bull market cycles, what guidance would you offer to individual retail investors?

Investors should have a long-term orientation for equity investments and should consider products based on their investment goals and risk appetite. Investors can look to invest in a staggered manner to ride the near-term uncertainties. Investors may consider asset allocation strategies.

With the right strategies, investors can take advantage of the potential of the stock market and make informed decisions to meet their long-term financial goals. One can opt for an asset allocation strategy. Asset allocation is the diversification of your financial portfolio among several asset types, such as equities, debt, gold, and so on. Investing across uncorrelated asset classes can reduce risk and provide higher risk-adjusted returns in the long run.