Veteran fund manager S Naren’s comments have sparked a significant debate on SIPs, especially for the short-term in small and midcap funds. SIPs today are a very popular investment instrument. For the average investor, who wants a certain exposure to equities, the perception is that these seem to offer the perfect combination of risk and return. However, are SIPs the best way to deal with market volatility and maximise returns?
S Naren had raised the red flag on small and midcap SIPs at a recent event – the IFA Galaxy 2025. He had also indicated how sometimes fund managers have to balance the investment rationale with demands of the sales teams and business dynamics.
Here are some quotes from the talk that have drawn attention:
“Quote 1”
“We think it is a clear time to take out lock, stock, and barrel from small- and mid-caps”
“Quote 2”
“The entire risk is now borne by you (the distributor) and the investor – 100%. So, the entire problem of any loss will also be borne by you, 100%.”
“Quote 3”
“I do not believe that this is the time to invest in small and mid-cap SIPs. But I am unable to convince my sales colleagues. I tried my best but failed miserably. But I believe that this is the time to stop SIPs in small and mid-caps because they are so overvalued.”
ALSO READVeteran fund manager S Naren’s advice on SIPs in small and mid-cap funds sparks debate
Financial Express.com reached out to other industry stakeholders on their take about this key concern.
What’s the big worry in small and midcap SIPs
Many believe that the heavy demand for small and midcaps is what many fund houses look at optimising upon even when market conditions may not be favourable- Samir Shah,Head Online Business, Axis Securities explained, “Small-cap and mid-cap stocks have always been favoured by retail investors, who tend to gravitate toward these segments. Therefore, if there is customer demand, there must also be adequate supply. Consequently, despite the high valuations of mid-caps and small-caps, demand persists. Given the recent corrections in these sectors, many believe that valuations may have adjusted,
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