Wealth advisors suggest portfolio clean-up, in favour of largecaps

“Investors need to be worried about schemes where the returns are too high or those which have been underperformers relative to their benchmark indices,” said Vineet Nanda, founder, Sift Capital.

Some of the mutual fund scheme categories that have been top performers in recent times include PSUs, de fence and manufacturing.

“Given this sharp run-up, investors could take some money off the table in PSU funds and defence funds which are narrow themes and valuations are stretched,” said Nanda.

The PSU fund category has returned 93% on average in the past year, while defence funds have returned 113%.
Mid-caps and small-caps are the other scheme categories where investors could cut their exposure, said analysts.
“Within the equity pie, investors can take some profits from mid-and small-cap schemes,” said Nirav Karkera, head of research at Fisdom.Over the last year, the Nifty Midcap 150 index rose 55.25%, the Nifty Small cap 250 rose 58.51%, and the Nifty 50 gained 27.79%.

Financial planners said investors must also look at the schemes that have underperformed in the recent raging bull market.

“Investors need to examine their returns compared to their benchmarks and move away from schemes that have failed to beat their benchmarks over the last three years,” said Nanda.

WHERE TO INVEST?

Within equities, funds with a dominant large-cap portfolio are the top picks for those looking to cut their holdings in riskier areas in the market.

Karkera recommends shifting the proceeds to gilt funds with tenure of 4-5 years, which could benefit in the event of a rate cut.

Long-term investors could continue to hold 60-70% in equities, 5-10% in gold and 25-35% in fixed income, to optimise returns and lower risks over the long term, he said.