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Dhirendra Kumar, founder and CEO of Value Research, says stress tests are flawed and are driving activity.
Small-cap and mid-cap funds have received a lot of attention from investors in recent years. However, the recent general market weakness has led to speculation about whether this trend will continue.
“A stress test scenario could make the market decline even worse,” Kumar said, underscoring the importance of assessing the quality of small-cap portfolios and suggesting that investors should now look at the strategies adopted by fund managers. He suggested that it may be necessary to consider it more closely.
“Make no mistake, we found bubbles here, and this is very cyclical,” he said. “Investor behavior, investment methods, and mutual fund diversification are reducing a lot of risk.”
However, Kumar said thematic funds and PSU funds need to be reviewed. He says the proportion of small-cap stocks in a portfolio should be “preferably between 30 and 40 percent, but not more than 50 percent of the portfolio. If you look at the average exposure for flexi-cap fans, it shouldn’t be more than that. ” 10-12%. ”
Kumar said SEBI’s notification to AMCs regarding inflows into small and mid caps will be reflected in the performance. “[Especially]if you’re used to great performance from small-cap stocks, you need to be prepared for a long period of poor performance.”
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