With markets hitting all-time highs, how should you position yourself as an mutual fund investor?

• Nifty crossed the 26k mark today, and Sensex also over 85,000
• Continue with SIPs in small, and mid-caps, but focus on large-cap funds
• The bullish trend to possibly continue till November, 2024

The BSE Sensex hit the 85k mark yesterday, and closed today at 85,182.29 points, up by 255 points. Nifty followed suit, closing the day at 26,013.15 points, inching up by 72 points during the day, and breaching the 26k in the history of the index. Clearly, the bulls are are favor at the moment, thanks to the resilience and confidence of domestic investors, and a 50-basis point cut in interest rates announced by the US Fed last week.

Even foreign investors are enthused, making September the month that received the highest foreign inflows during 2024. As of September 24, 2024, foreign investors have poured in about Rs 84,723 crore in Indian markets. With the markets continuing their bullish momentum, it could be difficult for retail investors to position themselves correctly.

What makes this even more crucial is the sustained continuance of this upward momentum, at least for the time being. Per Gaurav Garg, Lemonn Markets Desk, markets are getting excited about the chances of another large 50 bps cut from the US Fed in the next meeting in early November.

"Current market bets suggest a ~60% chance for the same, compared to less than 25% probability given last week", says Garg. So, how can investors make the most of this uptrend? We decode that for you.

SIP on DIP, but keep SIP-ing

Despite experts currently pegging the market to be in over-brought category, with elevated valuations, India will continue to be amongst the world's fastest growing economies in the medium term. Per Goldman Sach's India strategy, companies operating in the auto, chemicals, real estate, FMCG and other consumer durables may observe a large surge in their profits, with consumer durables registering the highest growth in this cycle.

Says Vishnu Kant Upadhyay, AVP, Research and Advisory at Master Capital Services Ltd, "The Indian market remain attractive, largely supported by potential increased foreign inflows and robust monthly Systematic Investment Plan (SIP) contributions. The market appears to be in a "one step back, two steps forward" phase, consistently trading above key moving averages. Given these strong technical and fundamental indicators, we anticipate the Sensex to reach the 1,00,000 mark by the first half of next year.

"Investors are advised to adopt a "SIP on DIP" strategy to capitalize on market dips while benefiting from the ongoing bullish trend", says Upadhyay. He is referring to the age-old market strategy of buying more mutual fund units when the market is down or undervalued. What this does is let investors avail more units or quantum of a mutual fund scheme at lower prices. Hence, when the markets begin rising, investors stand to earn higher returns.

However, timing the market for dips is a herculean task, and is certainly not for the regular investor. Hence, while you can certainly buy more MF units whenever the market is down, you should not discontinue your existing SIPs. You can also utilise the ongoing market momentum to your benefit by rebalancing your portfolio, weeding out any underperforming stocks or mutual fund schemes.

Swapnil Aggarwal, Director, VSRK Capital strongly advises mutual fund investors to begin focusing on quality, large-cap stocks. However, if you have ongoing SIPs in small and mid-caps, maintaining those SIPs would be wise, given you have a long investment horizon of 15-20 years, which should yield good returns in those segments.

"For large-cap exposure, consider parking funds in liquid funds and initiating a systematic transfer plan (STP) over the next 4 to 6 months. This strategy will allow you to average out their purchases at varying NAVs, as it's impossible to time the market perfectly", notes Aggarwal.

Another possible investing avenue within mutual funds could putting funds in long-duration funds, as they respond strongly to interest rate changes, benefiting from declining yields. Thematic funds operating in specific sectors such as FMCG, auto etc., albeit risky, can also generate good returns in the long run.