The Mutual Fund Show: Why Investors May See Muted Returns In 2024

The last year ended with both the indices touching new lifetime highs. However, this has increased the expectations of investors, thereby causing worry among industry experts.

As more and more people enter the mutual fund market, the expectations of investors have touched a new high, according to Radhika Gupta, managing director and chief executive officer of Edelweiss Mutual Fund.

"The year 2024 really should be of muted expectations. My biggest worry going into this year is the kind of expectations that people have when I talk to, especially ordinary investors," Gupta told NDTV Profit. It's important to moderate expectations as funds will not outperform every year, she said.

This doesn't mean equity markets are going to do badly. "It literally means the middle path," she said.

However, she expects this year to be one of transition, as the interest rate regime nears an end and the elections draws closer. In addition, earnings have seen a rebound with double-digit growth and "fundamentally, companies are doing well", Gupta said.

"Times have changed from a large-cap having an average size of Rs 3,000 crore to now a small-cap having a size of Rs 12,000-13,000 crore. Just like the structure has changed, so has the way of interaction."

There is a need to think decadal instead of looking at just one year, she said. "I also think that if you need participation in India's economy over the next 10 years, a pure play large-cap approach doesn't work."

Gupta suggested that if one wanted to be invested in the economy, then mid caps are the best approach. According to her, "40% large, 30% mid, and 30% small. I think that's a much more accurate reflection of where India will be over the next 10 years."

Those who are still leaning towards large caps can depend on balanced advantage funds or hybrid funds as they have lower risks, she said.

"I think people don't realise the range of hybrid products that are available today," she said. They are the best way to invest in a fixed income group, "if you don't have a good understanding of the workings", Gupta said.

Last year, the rising SIP order book surprised Gupta. "In fact, I have this bold belief that India will have a Rs 35,000-crore SIP book in five years," she said.

This year, she is worried about people's behaviours, theme-based investment, and products where expectations are short-term, she said.