Many investors are sitting on notional losses, says Nikhil Rungta of LIC MF

The recent moderation in SIP flows is largely a function of short-term sentiment, particularly in response to sharp corrections in small- and mid-cap segments, Rungta said

Lower costs, increased regulatory focus on transparency, and the simplicity of index investing have made passive funds particularly appealing to first-time investors and institutions, said NIKHIL RUNGTA, co-chief investment officer for equity at LIC Mutual Fund Asset Management, in an email interview with Devanshu Singla. Edited excerpts:

 

What is your assessment of India Inc.’s March 2025 quarter (Q4-FY25) performance? Any sector that surprised you positively or negatively?  India Inc. has delivered a reasonably healthy Q4-FY25 performance, with revenue growth and margin improvement in several sectors. While top-line growth moderated due to global demand softness and high base effect, bottom-line growth outpaced expectations in many cases, supported by lower input costs and operating efficiencies.  Capital goods and industrials were amongst the performers, benefiting from order inflows, healthy execution, and operating leverage. Sectors linked to government capex like defence, railways, etc. also surprised on the upside. Auto ancillaries showed resilience thanks to strong domestic demand and premiumisation trends.

 

 

On the other hand, the IT sector continued to face headwinds with slower decision-making in key client geographies. Fast-Moving Consumer Goods (FMCG) saw mixed results—urban demand held up, but rural recovery remained sluggish. The telecom and chemical sectors also witnessed pressures on margins due to input volatility and pricing constraints. 

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How should investors adjust their portfolio to hedge against geopolitical risks?

 

To hedge against geopolitical uncertainty, investors can consider gold and multi-asset allocation funds, which may help in stabilising returns and absorbing shocks across asset classes. In equities, it’s prudent to stick with companies that have strong balance sheets, and domestic demand tailwinds.

 

Among sectors, utilities, healthcare, and consumer staples tend to be relatively defensive in volatile times. Investors should avoid over-leveraged names and businesses heavily dependent on global trade or discretionary capital expenditure.

  SIP flows into the equity segment have been thinning. How long do you think this will last?

 

The recent moderation in SIP flows is largely a function of short-term sentiment, particularly in response to sharp corrections in small- and mid-cap segments. Many investors are sitting on notional losses, leading to a temporary pause or reduction in fresh flows. However, this is not the first time we have seen such a pause - historically, SIP flows have always bounced back once markets stabilise. Investors need to understand that SIP is a long-term wealth creation tool, not a tactical timing device.

 

Continuing SIPs through downturns are what actually leads to rupee cost averaging and better long-term outcomes. That said, rebalancing into debt may make sense for investors nearing financial goals or looking to preserve capital.

 

With interest rates expected to moderate in the coming quarters, bond funds may have potential to offer risk-adjusted returns. A balanced approach across equity and debt will serve investors well in the current environment.   

 

What has been your strategy in the last 6–8 months?

 

As small- and mid-cap valuations became stretched earlier this year, we increased cash levels marginally and prudently- across portfolios. We have continued to back ideas in industrials, capital goods, financial sectors supported by domestic growth, formalisation, and healthy balance sheets. We have also increased exposure to manufacturing and defence-linked themes which are backed by policy tailwinds and capex momentum.

 

We remain underweight in global cyclicals, where demand recovery is patchy, and in certain commodity-linked sectors where pricing power has eroded. Real estate and utilities have been evaluated selectively with a focus on balance sheet strength and project visibility. The broader theme has been to ensure that we remain agile enough to respond to market shifts without compromising on long-term objectives.

 

India’s passive mutual fund AUM is growing sharply, now accounting for 16.7 per cent of the overall mutual fund industry AUM. Do you see this trend continuing?

 

Yes, the rise of passive investing is a secular trend, and it’s likely to gain further traction. Lower costs, increased regulatory focus on transparency, and the simplicity of index investing have made passive funds particularly appealing to first-time investors and institutions. The evolution of smart beta and factor-based investing may also blur the lines between active and passive, offering more tools to investors. Ultimately, both styles will coexist, and investor education will play a key role.