Should you continue holding SIPs in mid, smallcap funds or stop them?

Those significantly overweight on these categories must book profits to rein in exposure. A lot depends on your horizon and risk appetite

S Naren, executive director and chief investment officer, ICICI Prudential Asset Management Company (AMC), set the proverbial cat among pigeons recently. Addressing a gathering of distributors, he warned that systematic investment plans (SIPs) initiated after 2023 in midcap and smallcap funds face the prospect of poor returns over the medium term.

 

Naren highlighted that valuations in these segments are at absurd highs, market capitalisation is significantly high compared to profit-after-tax contribution, and momentum has weakened recently. He pointed out that since investors are averaging at elevated valuations, medium-term returns could be low.

 

Amid slowing earnings growth and multiple risks in