Heightened global trade tensions in the wake of Trump’s tariff tantrum have sent global stock markets into a tailspin, wiping out trillions of dollars of investor money over the last few days. In the domestic equity market, benchmark indices Sensex and Nifty have crashed over 5% each in the last one week. Broader indices BSE Smallcap Index and BSE Midcap Index have seen deeper cuts during the period.

Stocks across market caps have seen intense sell-offs in the last one week, reflecting also in smallcap, midcap and largecap mutual funds. Midcap funds emerged as the biggest loser among the three, with an average return of (-)2.71% over the past one week. Largecap funds, however, logged a greater fall with (-)2.52% in the last one week against smallcap funds (-)2.16%.

Also read: Best small-cap funds with up to 9.7 pc returns in just 1 month – Should you invest?

What should SIP investors do now?

Whenever the stock market falls, a slight panic sets in. SIP investors keep pondering over one question – should they continue investing? Similarly new investors think – will it be right to invest now? These questions keep troubling investors. Some investors get confused about the category of funds they need to choose. At such a time, large-cap mutual funds, that is, funds that invest in large companies, can easily be the safest option. But how? Because these funds invest in companies that have been established in the market for years — whose business is sustainable, profits come continuously, and whose brand value is strong. When the market shakes, these companies face less volatility.

Also read: Three reasons why small caps are falling today: BSE small cap index crashes 5%

Now, if we talk about the current situation, there is fear in the market, but experts believe that the shares of big companies are now starting to look more ‘value for money’ than before. Even though the market has fallen significantly, mid-cap and small-cap stocks still seem a little expensive, feel market experts. In comparison, they see large-cap stocks ‘marginally’ overvalued.

Fund managers weigh valuations of stocks

On smallcap and midcap stock valuations, fund managers at fund managers at 3P Investment Managers Pvt Ltd, are of the view that the recent market correction was a result of demanding valuations, elevated earnings expectations and a large supply of equities both from capital raising and FII selling. Smallcaps and midcaps corrected the most due to their high valuations, they said.

“We believe that after the recent correction, risk-reward for largecaps is now favorable over the medium to long term. However, in our opinion, risk-reward for SMIDs remains unfavorable despite the sharp correction,” according to Prashant Jain, Founder and CIO at 3P Investment Managers.

So if you are going to start investing, especially starting a SIP for the first time, then think – would it not be better to start with a fund that gives a strong foundation?

Large-cap funds not only provide stability to the portfolio, but also take this journey of investment forward with confidence, not panic.

The bottom line is that SIP is a long-distance race. And if you start the race on a strong and balanced footing, reaching the destination can be much easier and more comfortable.

Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.