By Ananya Grover
Observations by ICICI Prudential chief investment officer S Naren, who has advised investors to get out of small and mid-cap stocks lock, stock and barrel, have evoked strong responses, with Edelweiss Mutual Fund chief executive Radhika Gupta urging investors not to “fall for fear-mongering or 10-day debates”.
Speaking at the IFA Galaxy Event in Chennai late last week, Naren had observed that while, in the past, a significant portion of the risk resided with banks and larger institutions, at present, it lies with retail investors.
He cautioned that 2025 could be the most dangerous year since the 2008-2010 period. “Investors lost money in many companies back then, particularly in banks. Many real estate companies also made mistakes by over-leveraging, but those mistakes happened indirectly — through banks and corporates.
“Today, when companies seek capital for acquisitions or new projects, they no longer rely on bank borrowing. Instead, they raise money directly from equity investors through qualified institutional placements (QIPs) or IPOs,” he explained. Naren had observed that small- and mid-caps were trading at “absurd” valuations and advised investments in hybrid funds.
Gupta said in her social media posts that SIP is meant to be a simple savings investment instrument for the common person. In her words, it is “a fill it, shut it, forget it (kind) because most people struggle with markets, market caps, and SIPs.”
She urged investors to find a good manager and hold for 10 years in a sensible and balanced way. She observed that “everything, including mid-and small-caps, is good in balance. Even an average flexi-cap fund has a 30% allocation to this category”. Gupta said if one looks at the returns of anything from the top of the cycle to the bottom, say 2006-2013, they will not look pleasant.
Naren had observed that “if you make SIP investment in the wrong product at the wrong time, you’re headed for trouble.” He also said the outlook for investors who started SIPs from 2023 is pretty bad, unless they are 20-year SIPs, which are going to be very few. He cited the example of an SIP investment in midcaps between 2006 and 2013, which would have generated negative returns.
For short term, Gupta does not recommend buying mid-cap funds. “No one should buy a mid-cap fund for three years,” she replied to an ‘X’ user, recommending hybrids.