Mumbai, February, 2024.

In its annual note, DSP Mutual Fund revealed insights for a thoughtful portfolio approach in 2024. DSP advocates diversifying your portfolio across market cap segments to maintain a balance during different market conditions.

A year ago, no one could have anticipated the returns the markets delivered in 2023. The global economy proved more resilient than expected, inflation cooled faster than predicted, and companies retained most benefits of lower raw material prices, leading to higher margins. Above all, the positive sentiment for India continued, resulting in increased relative multiples.

In 2023, mid and small caps have experienced significant run up, good quality and not so good quality– both. DSP’s preference is towards quality midcap as it provides a more effective approach to wealth creation with reduced volatility and fewer drawdowns. Given the current scenario with elevated multiples which seems to be pricing in most good news, sticking to quality companies, understanding business cycles and valuations cycles in each sector becomes increasingly crucial going forward.

Recent data indicating improvements in operating performance has led DSP to augment its holdings in PSU companies. The selection criteria, however, remain stringent, focusing on companies that meet fundamental parameters. Should these PSU entities sustain efficient operations, a continued trend of outperformance is expected due to increased business opportunities. However, guided by their historical track record, DSP maintains a rigorous approach, maintaining high benchmark for ownership of PSU companies.

While the global challenge of an aging population persists, India remains in an advantageous position with one of the lowest median population ages globally. With this demographic constituting a dominant segment of our population, we can anticipate a continuous increase in the working-age population and growing income levels. This not only ensures stability but also enhances the visibility of sustained growth over the coming years.

According to DSP, while India does offer an exceptional long-term investment opportunity, investors should however remain vigilant considering a shifting landscape marked by decelerating global growth, rising global interest rates, persistent near-term dollar strength, and heightened geopolitical uncertainties. While India, with its primarily domestically driven growth, is expected to be relatively less susceptible to global macro risks in this changing environment, expectations need to be appropriately set for the current year on back of rich valuations.

At DSP Mutual Fund, we recognize that there will years where ‘value’ will deliver better outcomes compared to ‘growth at a reasonable price’. There will also be years where some sectoral themes will deliver significant alpha. Our role, like a team in Tour de France, have varied talent to achieve the ultimate objective – deliver consistent, risk-adjusted long term returns for our unitholders. Our goal remains – improving financial outcomes for our 3.5 MN existing investors while also welcoming new ones who can benefit from our simple and disciplined approach to achieving their financial goals,” says Vinit Sambre, Head – Equities, DSP Mutual Fund.