Mutual Fund SIP In the last few months, the domestic stock market has seen a steady decline. In the last six months, the Nifty 50 has lost about 10%, while the Nifty Midcap 100 index has fallen by about 18% and the smallcap index has fallen over 21% in this period. This major decline has worried the investors and now they are questioning whether this decline will continue. In the current scenario, should investors get out of smallcap and midcap mutual funds?

Mutual fund investors misled by the decline in stock market
Mutual funds investing in shares are in the worst condition in the last 10 months. Investment in equity mutual funds has reached a 10 -month low and after a decline in mutual funds, experts are now trying to attract people's attention to other investment options. Small and midcap stocks have given strong returns in the last few years but the recent decline has almost confused investors. There are several reasons for market fall, including high evaluation and recession in income for small and midcap companies. In the last five years, revenue increased by 14% annually, but shares gave a return of 28%. Similarly, the stocks gave a return of 27% despite an annual 21% increase in income of small companies. Subsequently, high prices of these shares could not maintain due to slow income hike. In addition, the withdrawal of foreign institutional investors (FIIS) is also a major reason for the decline.

The market is going to fall further.
Although the market has declined significantly in recent times, the evaluation of midcap and smallcap is still unbearable. In the current market environment, the midcap and smallcap index are still trading on high evaluation, so the possibility of further decline in the shares of these two cannot be denied. In addition, if the fall continues for a very long time, investors may suffer more.

What to do with small-cap, mid-cap funds in portfolio?
If your portfolio has more smallcaps and midcap funds than necessary, consider reducing your exposure. The stock of these funds should not exceed 20-30% in equity portfolio. If this stake is high in your portfolio, it can be transferred to largecap funds. If you need money in the next three to five years, avoid investing in both these funds. It is important to give at least 7 to 8 years time to invest in these funds, but in the current situation, this period can be further extended. If you want to invest in less than five years, invest in a more balanced way. For this you can consider flexi-cap or multicap funds.

What should mutual fund investors do in the falling market?
It is natural for people to be worried in the falling market, but do not hurry to sell all midcap and smallcap funds due to fear. Adopt a balanced strategy and diversify the portfolio. If your investment period is 7 years or more and you have the ability to take risks, it would be a good strategy to continue investing even during the current recession. Historically, investing through SIP for at least seven years has usually been beneficial, but short -term investors with weak risk profiles should consider investing in other property classes rather than shares in the current scenario.