Protect gains made over past five years, avoid small- and mid-caps'

In an uncertain financial landscape marred by slow earnings growth at home and global tariff tantrums, the best equity strategy for the householder is to not allocate just to equities, but to also channel savings into debt, global stocks, realty, gold and silver, according to the investment head of the country's second-largest fund house.

- Ram Sahgal

Those choosing the systematic investment plan (SIP) route should avoid pumping money into overvalued small- and mid-cap stocks and focus instead on large-cap, flexi-cap and hybrid funds, said S. Naren, executive director and chief investment officer at ICICI Prudential Asset Management Company Ltd, which manages assets worth over ₹9.18 trillion.

Edited excerpts: You are known to outperform your peers when the markets are under stress.

How do you stay on top of the current financial landscape punctuated by global headwinds and slowing earnings growth back home? As of February 2025, the goal for most investors should be to protect the money they've made over the last five years. Most investors who invested in equities or real estate during this period have likely earned good returns.

However, if you go back to 2020, the goal was to make money because, from 2013 to 2020, returns in both equities and real estate were minimal.

Currently, mid- and smallcap stocks are highly overvalued, while large-caps are relatively more reasonable. FIIS have sold over 1 lakh crore of large-caps in the last few months, creating this valuation disparity. Small- and midcaps have rarely been as expensive as they are today, except perhaps in 2007. Given the current risks, we recommend a diversified asset allocation strategy that includes equities, debt, real estate, global stocks, and gold/silver.

The best equity strategy today is not to put all your money into equities, especially midand small-cap stocks. SME IPOS and unlisted stocks are even more risky.

Asset allocation is crucial during volatile times, and such an approach helps manage risk while capturing long-term growth.