Give your portfolio the SIP advantage

With the Sensex and the Nifty having declined by around 8% since the beginning of the current calendar year, the net asset values ( NAVs) of equity mutual fund schemes have also plummeted during this period, making them an attractive buy at the current prices.

Retail investors, especially those seeking long-term investments in equities, should consider this as an opportunity to enter the equities through systematic investment planning (SIP). What further warrants an investment in equity mutual funds is their ability to cushion their fall despite severe market volatility.

Diversified equity schemes, on an average, have returned around -4.2% since the beginning of the current calendar year, against the Sensex and Nifty returns of -8.2% and -7.6%, respectively during the period. Within the category of diversified equity funds, schemes like ICICI Prudential Discovery and Canara Robeco Equity Diversified have generated positive returns of 4.4% and 1.8%, respectively since January.

The dynamic diversification skills adopted by these multi-cap equity schemes enable them to outperform the major market indices. For instance, pharma and FMCG have been the best-performing sectors in the market for over a year now. Since the beginning of the current calendar year, BSE Healthcare index has returned 4.1% till date while BSE FMCG has returned about 0.1%. But, given the bare minimum weightage that the Sensex and the Nifty have in these two sectors, these two indices have hardly benefited from the rally in these sectors.

Most diversified mutual fund schemes, on the other hand, have currently allocated a higher percentage of their portfolios to the pharma and FMCG sectors, ranging from 5%-11%. For instance, ICICI Pru Discovery, which is benchmarked to Nifty, has allocated more than 9.6% to both pharma and FMGC sectors while Canara Robeco Equity Diversified has invested around 7.3% of its equity portfolio in the pharma stocks.