Nifty up 13% from April's low. How should mutual fund investors alter their investment strategy?

With the benchmark index
Nifty
50 up nearly 13% from April's low and touching 25,001 on Monday, market experts note that while many investors may consider profit booking, mutual fund investors, particularly those with a long-term outlook, are advised to stay invested. The recent highs reflect strong underlying earnings growth, supportive macro factors, and positive investor sentiment, rather than a signal to exit.
'Timing the market is challenging, and exiting prematurely could mean missing out on further upside or the power of compounding. That said, investors should use this opportunity to review their asset allocation and rebalance if their equity exposure has gone significantly above their target levels. Booking partial profits and reallocating to underweight asset classes, such as debt or gold, could be considered purely from an asset allocation standpoint—not as a reaction to the index level,' said Sagar Shinde, VP Research, Fisdom.
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Another expert advocates the same opinion that unless one has short-term financial needs or the portfolio has deviated significantly from the defined asset allocation targets, staying invested is the wiser choice for long-term wealth creation, as the Indian economy remains on a strong footing, supported by robust earnings, government reforms, and macroeconomic stability.
'For long-term investors, trying to time the market based on index levels often results in missed opportunities. Instead of exiting the market entirely, consider rebalancing your portfolio—trim some exposure in overvalued sectors or schemes and reallocate towards laggards or more balanced options if needed. This allows you to capture gains while keeping your investments aligned with your financial goals,' recommends Adhil Shetty, CEO of Bankbazaar.com
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The index stood at 22,161.6 on April 7, marking the lowest level in the current financial year so far. Over the past three months, it has risen by 10.22%, while its six-month gain stands at 2.60%. The Nifty 50 has gained 8.25% over the last year and 5.11% so far in the current calendar year.
Nifty50
touched its 52-week high level on September 27, 2024 of 26,277 and is currently down by nearly 5% from its 52-week high level.
As the benchmark index rises, experts recommend that investors continue their SIPs but exercise caution with lump-sum investments, advising them to stagger these investments over time.
Shetty of Bankbazaar recommends that
SIP
(Systematic Investment Plan) investors should continue their regular contributions regardless of market levels as SIPs are designed to eliminate the need for market timing by investing a fixed amount at regular intervals, which helps average out the cost of units over time and this approach works particularly well during volatile or high market phases, as it ensures discipline and allows investors to benefit from market corrections through rupee cost averaging.
'On the other hand, investors with lump-sum amounts should be cautious when the market is at all-time highs. Rather than deploying the full amount at once, consider a staggered investment strategy—spread the investment over 3 to 6 months or even longer through Systematic Transfer Plans (STPs) into an equity fund. Alternatively, deploying the lump sum can offer exposure to equities while managing downside risks. This measured approach helps reduce regret from potential short-term corrections and aligns better with long-term wealth-building goals,' he added.
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To continue with the SIPs in the current market scenario, Shinde adds that lump-sum investors, however, should adopt a staggered approach as deploying the entire amount at current levels could expose them to short-term volatility.
'A Systematic Transfer Plan (STP)—where the lump sum is parked in a liquid or ultra-short duration fund and gradually moved into equities—can be an effective method to mitigate timing risks. Alternatively, if the investor has a medium- to long-term horizon, partial deployment in balanced advantage or multi-asset funds can serve as a middle ground, offering market participation with downside buffers,' Shinde adds.
ETMutualFunds looked at the performance of equity mutual fund categories since the April low and found that out of 21 categories, 19 offered double-digit average returns and two gave single-digit returns in the same time frame.
Since April 7, the
Auto sector
based funds offered the highest average return of 18.30%, followed by technology based funds which gave 17.04% average return in the same period.
International funds
gave 16.07% and infrastructure funds gave 14.86% average return in the same period.
Midcap and smallcap funds gave 14.82% and 14.71% respectively since April's low level. Contra and largecap funds were last in the list of double-digit gainers. The categories gave 11.77% and 11.22% respectively in the mentioned period.
Consumption based funds and pharma and healthcare funds gave 9.83% and 8.50% average returns respectively in the mentioned period.
Post the categories gaining in double-digits and market above 25,000 mark, Shinde advices investors fresh investments at market highs should be made with a margin of safety and diversification in mind and for new investors, it's important not to shy away from equity markets entirely—rather, the focus should be on how and where to deploy capital.
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'Conservative hybrid funds or balanced advantage funds (BAFs) offer a prudent starting point. These funds dynamically manage equity exposure based on valuations and volatility, making them ideal for entry during elevated market levels'
'Flexi-cap and multi-cap funds are also well-suited for long-term investors due to their allocation flexibility across market capitalisations. For global diversification, international funds—especially those focused on US or developed markets—are also attractive, given their recent rebound and long-term growth potential. In short, invest, but do it with a category that aligns with your risk appetite & time horizons,' he further added.
On the similar lines, Shetty advices that quality-focused index funds that invest in fundamentally strong companies can offer consistent returns with relatively lower risk and the key is to match the investment horizon and risk tolerance with the right fund category and investing through SIPs or staggering the investment through STPs (Systematic Transfer Plans) can further reduce timing-related risks.
'Investing at market highs requires a disciplined and cautious approach, especially for new investors who may be concerned about near-term corrections. Rather than shying away from investing altogether, new entrants can consider fund categories that offer built-in risk mitigation and asset allocation flexibility. Quality-focused index funds that invest in fundamentally strong companies can offer consistent returns with relatively lower risk. The key is to match your investment horizon and risk tolerance with the right fund category. Investing through SIPs or staggering the investment through STPs (Systematic Transfer Plans) can further reduce timing-related risks,' the CEO of Bankbazaar advised.
One should always consider risk appetite, investment horizon, and goals before making investment decisions.
(
Disclaimer
: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
If you have any mutual fund queries, message on ET
Mutual Funds
on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on
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