Diwali also marks the beginning of the Samvat 2075, the Hindu calendar year, and it is believed that muhurat trading on this day brings wealth and prosperity throughout the year.
For good returns, in the Samvat year 2075, prudence, right information and short- and long-term goals should be the deciding factor in making mutual fund investments. Given the uncertainty in the economy and various upcoming events, the investment in equity mutual funds require judicious selection of MF schemes that would stand the test of the time and provide good return even in the adverse scenario.
This also become important as in the year gone by, the one-year returns were negative for the equity mutual fund investors.
Equity mutual funds as on October 31 on the AUM (asset under management) weighted average return basis under-performed with negative return of 6 per cent against the Nifty 500-TRI (total return index) return of minus three per cent.
Jason Monteiro, assistant vice president (mutual fund research) at Prabhudas Lilladher, said, “For an investment horizon of 3-5 years, one can invest through a systematic investment plan (SIP) in large cap and multi-cap mutual funds. For a 10-15 year horizon, SIP in mid- and small-cap funds is recommended.
“For those who are looking to invest for one-year period, short-term debt funds are recommended. But one needs to look at asset quality of investments in the portfolio. The short-term debt fund needs to have high quality debt securities of AAA and similar grade.”.
Corporate bond funds of 1-2 year maturity can also be looked at as they have a high proportion of their investments in AAA rated securities, Monteiro said.
Diversification to overseas equities is recommended after one has streamlined investments in domestic equity funds, he said.
Prabhudas Lilladher has recommended certain funds as Diwali picks for different kind of investors, these funds have at least 3-year track record and minimum assets under management (AUM) of Rs 150 crore. These include Axis Blue Chip Fund (AUM Rs 2,877 crore) for those who want to have stability large-caps in their portfolio.
Another choice could be ICICI Prudential Multi-cap (AUM Rs 2,911 crore) as the fund gives investors the advantage to benefit from a diversified portfolio across market caps and sectors. “Axis Mid-cap Fund (AUM Rs 1,562 crore) is ideal for long-term goals of 5-years or more such as retirement or children’s education. One should invest via systematic investment plans (SIPs) to mitigate the market volatility,” Prabhudas Lilladher said while recommending this fund.
HDFC Small-cap Fund (AUM Rs 4,948 crore) is for very aggressive investors and investment should be made through SIP route, Prabhudas Lilladher said.
Kotak Equity Savings Fund (AUM Rs 2,295 crore) is recommended for conservative investors seeking income and capital growth over the next 3-5 years, Prabhudas Lilladher said.
Financial advisors prefer multi-cap and mid-cap funds for the new-year given the uncertainty in economy and the headwinds ahead. Mrin Agarwal, financial educator and founder, FinSafe said, “For the long-term investments equity mutual funds are recommended and given the uncertainty we suggest investment in multi-cap and mid-cap fund.”
“In the multi-cap fund category we advise investing in Motilal Oswal Multi-cap 35 fund and Mirae Asset India Equity Fund. In the mid cap category we recommend L&T Mid-cap Fund. In the balanced fund category, we recommend ICICI Balanced Advantage fund for those looking for dynamic asset allocation strategy and L&T India Hybrid Equity Fund for those looking to invest in pure balanced fund with 65 per cent equity allocation.”
While recommending debt funds, Agarwal said, “On the debt side ICICI Prudential Short Term Plan and SBI Short Term Plan is recommended for at least 3-year horizon. Fixed maturity plans (FMPs) are also recommended for 3 to 4 year duration, one can expect a post tax return of 7.75 per cent to 8 per cent though returns are not guaranteed in mutual funds.”