'A single sector will never be truly reflective of the entire economy'

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MFs investor base grow faster than AUM

: they should not be the primary investments. In that sense, sector/theme funds are for those investors who like the risk/return equation of the particular sector/theme (based on their analysis) but do not have the time to construct a portfolio and manage it.

Any investment decision in sector/thematic funds should be arrived at after careful analysis of the financial situation, risk tolerance and timeframe by the investor.

The way equity market declined in January, tell us how should an investor go about investing in large-, mid-, and small-cap? Why?

We believe that in a market like India, stock picking is more important compared to a top-down approach or taking sector bets. We believe long-term investors are better off adopting a bottom-up approach and invest in companies with good fundamentals across market cap ranges and sectors.

This would depend on the individual’s risk profile and return expectations. However, on a standalone basis a fund that invests across market capitalisations has a lower risk profile compared to that focussing on large, mid/small cap companies.

The returns are also likely to be commensurate with the risk. History tells us that mid and small cap companies are likely to be more volatile compared to their large cap counterparts.

Which type of debt fund is likely to perform comparatively better than the other debt funds in a scenario of high interest rate and tight liquidity position?

This would depend on the investor’s risk profile and investment objective. From a macro perspective, we believe that investments in fixed income funds should deliver attractive risk-adjusted returns over a 9-12 month period. With the exception of inflation, all other macro indicators such as credit and economic growth are benign from a fixed income perspective.