The stock market has been on a rough path in recent months. Dalal Street saw another decline on Friday, with the Sensex and Nifty falling more than 1% in early trading.
The Sensex tanked by 1,000 points as weak global signals, especially new tariff threats from the US, hit investor confidence.
Since the highs of September 26, 2024, the Nifty500, which represents a broad section of the market, has dropped by over 17%, while the Nifty50 has fallen around 14%. Mid-cap and small-cap indices have suffered even more.
After a strong bull run of nearly two years, many investors are now looking for safer investment options as the markets have seen a huge correction.
Mutual funds that balance risk and growth are a preferred choice among many. Below are some mutual funds that could be considered in this volatile market.
LARGE-CAP FUNDS
“Large-cap funds invest in well-established companies, which generally fall less during market downturns. Among active large-cap funds, Canara Robeco Bluechip Equity Fund has consistently outperformed the Nifty 100 over five-year rolling returns since February 2020,” said Subho Moulik, Founder & CEO, Appreciate.
However, passive large-cap funds have gained popularity due to their cost-effectiveness and performance.
Two noteworthy large-cap index funds recommended by Subho Moulik are:
ICICI Pru Nifty 50 Value 20 Index Fund – Picks 20 well-valued stocks from the Nifty 50 universe. Since September 26, 2024, it has outperformed the Nifty 500 and Nifty 100 in 60% and 58.5% of the cases, respectively. Over five years, it has consistently outperformed both indices.
Expense ratio: 0.3% (lower than actively managed funds).
Nippon India Nifty 50 Value 20 Index Fund – Outperformed the Nifty 500 and Nifty 100 in 59.14% and 58.06% of instances since September 26, 2024. Based on three-year rolling returns, it has beaten the Nifty 500 and Nifty 100 99.1% and 100% of the time since February 2020.
Expense ratio: 0.25% (even lower than ICICI Pru).
DSP TOP 10 EQUAL WEIGHT INDEX FUND
This fund spreads money equally across the 10 largest Indian companies, ensuring stability. It has outperformed the market 71.59% of the time since September 26, 2024.
FLEXI-CAP FUNDS
Flexi-cap funds invest across large, mid, and small-cap stocks, allowing flexibility in changing markets. Some top performers include:
Parag Parikh Flexi Cap Fund – Moulik said that it has beaten the Nifty 500 88% of the time since September 26, 2024.
100% outperformance on a five-year rolling return basis since February 2020.
HDFC Flexi Cap Fund – Beaten the Nifty 500 80.2% of the time since September 26, 2024. 77.5% outperformance based on five-year rolling returns since February 2020.
Sachin Jain, Managing Partner, Scripbox said that market volatility is expected to persist due to geopolitical uncertainties, tech sector developments, earnings reports, and ongoing global trade tensions. In such times, having quality in your portfolio is key.
“Turbulent markets often come with increased liquidity risks, and investing in high-quality funds ensures stability and resilience. A well-balanced mix of debt, hybrid, multi-cap, and large-cap funds can help mitigate risks while capitalising on opportunities,” he added.
Jain shared a list of 10 mutual funds investors can look to invest in amid a market downturn.
SBI Medium Term Bond Fund – A strong option for those looking for stable returns, especially in the current high-interest rate environment.
ICICI Floating Interest Rate Fund – Offers flexibility in changing interest rate conditions, making it a good short-term investment.
Aditya Birla Savings Fund – Another reliable floating interest rate fund providing stability in uncertain market conditions.
HDFC Equity Savings Fund – A hybrid fund that balances equity exposure with debt, making it a good hedge against volatility.
Kotak Equity Savings Fund – Similar to HDFC Equity Savings Fund, this fund provides a mix of equity and debt, offering stability and growth potential.
ICICI Multi-Cap Fund – Invests across large, mid, and small-cap stocks along with debt and gold, offering diversification and equity taxation benefits.
Parag Parikh FlexiCap Fund – A great option for long-term investors, providing exposure to both Indian and international markets with a large-cap bias.
Motilal Oswal S&P 500 Index Fund – Ideal for investors looking to diversify globally, benefiting from the resilience of US markets and a strong dollar.
DSP Top 100 Equity Fund – Focuses on large-cap stocks, making it a safe bet in times of market correction.
UTI Nifty 50 or SBI Sensex Plan – Cost-effective index fund options for passive investors looking to mirror market performance.