Inflow into equity mutual funds slumped by over 30 per cent to ₹14,091 crore in September due to a risk-off sentiment in the stock markets, mutual fund body AMFI said on Wednesday. Net inflows into small-cap funds were down by 37% at ₹2,678.47 crore in September and into midcaps declined by 20% to ₹2,001 crore.
Reasons for decline in small cap flows
“We believe the decline has happened because of the high valuations in the market. So investors have pulled out some parts as a profit booking in the market,” said Palka Arora Chopra, Director at Master Capital Services Ltd.
The decline in small-cap flows can be attributed to certain fund houses temporarily halting inflows, possibly due to concerns about rich valuations in the mid and small-cap space, said Akhil Chaturvedi, Chief Business Officer, Motilal Oswal Asset Management Company.
How should investors allocate their portfolios now?
As per Sooraj Singh Gurjar, Founder and Managing Director, of Get Together Finance (GTF), currently, not many investors are willing to have small-cap funds in their portfolios. “There are many small-cap companies with the potential to rise high after this breakthrough. An advanced technical analysis with the help of demand and supply and price action can surely be an aid for investors in this scenario,” recommended Sooraj Singh.
Additionally, this situation also gives investors the chance to diversify their portfolio with quality stocks of large-cap, mid-cap, and small-cap, he added.
Mukesh Kochar, National Head of Wealth at AUM Capital said that the valuation of the market is not cheap and investors are waiting on the sidelines to use any downside to increase allocation.
“Investors should remain cautious in the short term as the market may remain volatile in the short term due to the Israel-Gaza conflicts, and the US election,” said Mukesh Kochar.
He also suggested investors rebalance their portfolios as the equity run-up must have changed their original plan of asset allocation.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 12 Oct 2023, 01:54 PM IST