These Index Funds Can Replace Underperforming Large Caps In Your Portfolio
How do index funds stack up against large-cap schemes? Here's what experts have to say.
Large-cap funds have struggled to beat the benchmarks and the rolling returns of the actively managed large caps have also underperformed.
If these funds are weighing down the performance of your portfolio, index funds can be a replacement for large-cap schemes, according to Rushab Desai, founder of Rupee with Rushab.
“It’s a great time to look into index funds as actively managed funds have unfortunately underperformed,” said Desai on The Mutual Fund Show.
Traditional index funds like the Nifty 50 easily can replace large-cap funds in a portfolio, according to Desai.
The Nifty Mid-Smallcap Index 400 is a scheme that could do well, according to Desai.
A combination of active and passive funds is recommended by Desai, as he believes that there is potential in the small and mid-cap actively managed fund space as well.
“India is moving in both active and passive investing,” said Chintan Haria, principal investment strategist at ICICI Prudential AMC.
It is important to steer clear of over-owned and expensive themes, according to Haria. As themes and sectors see rapid increase in value, the sectors that perform well change, he said.
The uncertainty of these cycles of performance makes the entrance and exit into thematic funds difficult, said Desai.
“One should remain invested in spaces with good valuation and moderate ownership,” said Haria. As sectors run-up, the price increase often indicates the over-ownership of the schemes. Steering clear of such themes and sectors is important, he said.
Investors should accommodate schemes that offer both downside protection and upside capture, he added.
The new fund offering on the block is the ICICI Prudential Nifty Oil and Gas ETF. This thematic fund aims to grow with the increasing global demand of energy.
The manufacturing and defence themes have expanded rapidly, and the energy sector has a much more positive outlook as the consumption will increase as these sectors grow, according to Haria.
