Investors facing market uncertainty are adopting a balanced investment strategy to navigate volatile conditions. As per FundsIndia, Avinash Luthria, SEBI Registered Investment Adviser at Fiduciaries, recommends investing half of a large lump sum in Arbitrage Funds as a long-term investment and the other half via a new 12-month SIP in any Nifty 50 Index Fund. For first-time investors, the framework is simpler: start with a balanced or hybrid fund, layer in equity exposure through SIP/STP, and keep a portion in shorter-duration debt for liquidity. This approach helps reduce risk through the Arbitrage Fund while allowing investors to benefit from long-term equity compounding through staggered SIP investments.
Mutual fund investors are increasingly turning to index funds and ETFs amid market volatility, seeking safer, long-term investment strategies. According to reports from The Hindu BusinessLine, in March, investors pumped a whopping ₹23,820 crore in domestic equity ETFs and another ₹6,415 crore in equity-oriented index funds to take advantage of market crashes. The volatile equity markets have been driving informed MF investors to bet big on these instruments, particularly when markets tank sharply in reaction to global events.
The market correction was severe, with the Sensex and Nifty 50 crashing about 11% in March, marking its worst monthly performance since the pandemic-driven sell-off of March 2020. As reported by The Hindu BusinessLine, the market correction wiped out nearly ₹41 lakh crore in investor wealth, primarily triggered by escalation in West Asia conflict, inflation concerns on surge in crude oil prices and aggressive foreign investors outflows. However, both indices bounced back since then, with Sensex recovering from 71,948 points in March to 76,913 points in April. The key variable from here is the durable impact of supply chain disruption on oil and its eventual impact on the economy.
After record flows in March, the domestic equity ETFs attracted investment of ₹9,668 crore while equity index funds received ₹10,218 crore inflows in April, according to The Hindu BusinessLine. This continued interest in index funds reflects investor preference for passive, diversified investment strategies even as markets showed signs of recovery from their March lows. The strategy is straightforward: review current allocations versus original plan, rebalance gradually rather than in a single move, and use this as an opportunity to fix any concentration that may have built up.
Historical data from FundsIndia reveals strong long-term performance across asset classes. Indian equities delivered annual returns of 13.2% over 10 years, 11.3% over 15 years and 11.4% over 20 years, with investments multiplying roughly 3.5 times in 10 years, 5 times in 15 years and nearly 8.7 times over two decades. US equities performed even better, generating annualised returns of 19.4% over 10 years, 19.8% over 15 years and 15.2% over 20 years, with money multiplying at 5.9x, 15x and 17.01x over similar periods. Real estate provided returns of 5.6% and 7.9% in 15 and 20 years, while debt instruments delivered 7.5% to 7.6% over the same period. Gold also delivered impressive long-term returns, generating 14.6% returns over 20 years and multiplying investments by more than 15 times.
