View: How to pick the right mutual fund in a bear market

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The Indian stock market has witnessed its sell-off trend with the Nifty 50 index recently plunging below the critical 16,000 level, a 14.50 percent drop from its all-time high of 18,604 levels. If we look at history, the current downturn is a good time to buy stocks and India is in a stronger position in terms of economic strength in the medium to long term than its peers.

In the current scenario when the central banks are squeezing their balance sheets and raising rates due to rising inflation and higher commodity prices, we prefer large-cap stocks. Quantitative tightening affects the company’s earnings. The rising rates and lower liquidity in the market result in higher interest costs and low revenue.

A combination of the two affects the midcaps and smallcaps more as they have a little buffer to absorb the increased cost. For investors having a moderate risk appetite, we would select a large-cap mutual fund.

Professional guidance isn’t something shrewd investors avoid. Professional advice must be distinguished from your friends and family’s occasional advice and comments. You should always seek advice from a skilled market professional to help you tailor your portfolio to meet your financial objectives.

As far as largecap funds are concerned, we suggest Canara Robeco Bluechip Equity Fund in the large-cap category. An investor with a little more risk appetite can choose ICICI Prudential Value Discovery Fund in the Value fund category.

Canara Robeco Bluechip Equity Fund – Trailing Returns

YTD 1-M 3-M 6-M 1-Y 3-Y 5-Y 7-Y 10-Y
Canara Robeco Bluechip Equity Fund -2.6 -0.82 6.10 3.04 14.41 12.97 12.46 14.64
Benchmark -3.62 0.77 -3.29 6.98 12.82 12.52 12.26 14.83
Category Returns -4.04 -0.69 -4.83 5.15 11.69 11.35 10.85 13.83

Canara Robeco Bluechip Equity Fund had outperformed the benchmark consistently. It has delivered decent returns in a 3-year, 5-year, and 10-year timeframe.

ICICI Prudential Value Discovery Fund – Trailing Returns

YTD 1-M 3-M 6-M 1-Y 3-Y 5-Y 7-Y 10-Y
ICICI Pru Value Discovery Fund -1.99 1.6 3.88 16.67 18.79 12.94 11.92 18.15
Benchmark -3.62 0.77 -3.29 6.98 12.82 12.52 12.26 14.83
Category Returns -3.83 -0.14 -4.28 7.12 13.18 10.05 11.7 15.87

As one can see, ICICI Prudential Value Discovery Fund has consistently outperformed the benchmark in 1 year, 3-year, – year and 10-year period.

One can also look at Dynamic Asset Allocation funds that can act as a hedge against the adverse effects of market corrections.

People who have invested should keep their SIPs going, and if the market continues to drop, with valuations falling below historical averages, they should gradually increase their equity allocation in a controlled manner. People who are underinvested in equity should take advantage of the current market correction and begin rebalancing their portfolios to include more equities.

Do not consider the market environment; instead, consider your portfolio, and your investment objective, and then make a decision.

The author Abhinav Angirish is the founder of Investonline.in. Views expressed are personal.

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