According to Abhishek Singh, senior vice president and Fund Manager at DSP Mutual Fund, large financials and insurance companies offer the best risk-reward among sectors at present. As reported by NDTV Profit, Singh emphasized that headline valuations across market-cap segments can hide important nuances, with large caps appearing more reasonably valued across a range of valuation parameters. However, he cautioned that much of this is driven by beaten-down financials, noting that ex-financials and IT, even large caps are probably not cheap. This strategic preference is reflected in DSP Equity Savings Fund's portfolio allocation, which maintains significant exposure to financial and insurance sectors while maintaining a 32.59% equity allocation and 26.41% debt allocation.
Singh's preference comes against a backdrop of elevated overall market valuations, with the Nifty 500 trading at around 23 times earnings and the Sensex at roughly 21 times. According to the interview with NDTV Profit, markets are currently 10-15% above historical valuation averages. The DSP Equity Savings Fund reflects these challenging conditions, with its ₹3,464 crore AUM as of July 31, 2026, and a 10-year-5-month track record showing 9.29% average annual returns since inception. Singh pointed out that midcaps look the most expensive on headline valuations, although the quality of earnings can be better in many cases, with cyclical business peaks potentially inflating margins and making price-to-earnings multiples look deceptively attractive.
The DSP Equity Savings Fund demonstrates moderate risk characteristics with a Sharpe Ratio of 0.72 and Standard Deviation of 3.90, indicating relatively stable returns compared to category peers. As per ET Money data, the fund has delivered 3.45% returns over 1 year, 8.87% over 3 years, and 8.08% over 5 years. The fund maintains a 1.1% expense ratio, which is competitive within the Equity Savings category. The fund's equity portion includes significant holdings in HDFC Bank Ltd. (2.04% of portfolio), Mahindra & Mahindra Ltd. (1.98%) and HDFC Life Insurance Co Ltd. (1.28%). Singh highlighted that historically, equities have generated similar headline returns in aggregate when earnings growth was around 12-13%, though starting valuations above average mean multiples are more likely to work against investors over the medium term.
Despite challenging valuation conditions, Singh emphasized that investors should focus on real rather than headline returns. According to the NDTV Profit interview, Singh said investors should be broadly indifferent between earning 13% in a 7% inflation regime and 11% in a 5% inflation regime, adding that returns that look lower than those of the past decade could still be perfectly respectable in real terms. On a relative basis, commercial real estate also looks interesting as an alternative investment option. The DSP Equity Savings Fund reflects this approach with its diversified portfolio across financials, healthcare, insurance, automobile, and energy sectors, while maintaining a moderate risk profile suitable for investors seeking balanced exposure to equity and debt markets.
