Avoid chasing momentum in thematic strategies

Given the inherently higher concentration in thematic strategies, these risks can translate into elevated volatility.

- VINIT SAMBRE, HEAD, EQUITIES, DSP MUTUAL FUND

Vinit Sambre, head, Equities, DSP Mutual Fund, tells Saikat Neogi that in case the sector appears to be in a peaking phase—both in terms of business performance and valuation—despite a strong prevailing narrative, it is prudent to exercise caution and avoid chasing momentum. Excerpts:

Even as SIP inflows reached a record high in April, why did the SIP stoppage ratio surge?

Markets have become volatile, and after strong gains over the past few years, equity returns have moderated. In this environment, it is natural for investors, especially the new ones to feel anxious, which may lead to some fluctuations in SIP inflows. However, despite the current volatility, overall equity inflows and SIP contributions remain healthy. Some level of redemptions is to be expected—either from investors who have achieved their financial goals or from newer investors who are uncomfortable with the recent volatility and returns.

Given the rally in thematic funds, should individual investors be cautious now?