Large-cap valuations look relatively cheap to money managers after the outperformance of broader markets in 2023. The benchmark equity index BSE Sensex gained nearly 19 per cent in 2023. On the other hand, the BSE SmallCap and BSE MidCap indices rallied 48 per cent and 46 per cent, respectively.
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Considering the present market condition, ICICI Prudential Mutual Fund believes that 2024 is expected to be a challenging year with valuations climbing higher due to front-ended returns. Hence, their key recommendation for 2024 for new investors for lumpsum remains hybrid and multi-asset allocation schemes.
For existing investors, the fund house recommends staying invested as India’s long-term story remains intact. For investors who wish to add equity should focus on schemes that have flexible investment mandates to move between market cap and sectors.
“Valuations of large-cap stocks look relatively cheaper leaving more headroom for margin of safety,” ICICI Prudential Mutual Fund said.
On the other hand, Rishiraj Maheshwari, Founder and CEO of RISCH Wealth & RISCH Family Office told Business Today that India appears to be in a sweet spot on fundamental factors and can become a market of choice for equities.
“India is witnessing the best of macros in a long time with better growth, lower oil prices, revival in investment cycle. The country also appears well-placed on a relative basis both from geopolitical as well as long-term strategy point of view. Earnings recovery will be a key determinant for fund flows.
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With declining bond yields and India’s relative opportunities, there could be higher interest over the next few years,” Maheshwari said adding that 2024 will be a fascinating year.
In general, recent developments, such as lower crude oil prices, a fall in US yields, a change in interest stance by the US Fed and the narrative that there could be political continuity at the Centre (post the recent State election results), have been positive for the equity market sentiment. However, the geopolitical challenges remain and the equity valuations are elevated in many segments.
“In the current backdrop, large caps as a category appear to be relatively better placed in valuation terms and may be able to manage any unforeseen event risk better,” Maheshwari said.
From a sectoral perspective, PSU banks and OMCs look attractive to Maheshwari. He further added that one should follow strict risk profiling (conservative to moderate types) and time horizon (5-7 years) to build a good mutual funds portfolio.
He suggested keeping 60-70 per cent of funds in large caps and 10-15 per cent in midcap fund category at present. The market watcher suggested buying funds such as Mirae Asset Large Cap Fund, Franklin India Blue Chip Equity Fund, Kotak Emerging Equity Fund. Franklin India Prima Fund, Kotak Small Cap Fund and Franklin India Smaller Companies.
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“One should not have more than 5-7 per cent of overall allocations on small category funds at present,” Maheshwari said.
