DSP Mutual Fund CEO Kalpen Parekh has cautioned that while SIP inflows remain strong, a long period of weak market returns could dampen investor sentiment. He urged investors to prioritize disciplined asset allocation over chasing past performance to manage risks effectively.
Kalpen Parekh, MD and CEO of DSP Mutual Fund, has shared a cautionary perspective on the future growth trajectory of Systematic Investment Plans (SIPs) in India. While SIP inflows have been a primary driver of retail participation, Parekh warns that this trend could face a significant test if equity markets experience a prolonged period of stagnant or disappointing returns, specifically over a five-to-seven-year timeframe. He suggests that while mass investor exits are not an immediate concern, such a period of sluggish performance could raise the psychological barrier for new and existing investors, potentially cooling the growth momentum observed over the past five years.
The Importance of Balanced Portfolios
Investors often make the mistake of viewing equity investments in isolation, neglecting the necessity of proper asset allocation. Parekh argues that a portfolio should be built based on an individual’s specific time horizon and tolerance for market swings. For those who are uncomfortable with temporary capital erosion, shifting toward hybrid, multi-asset, or fixed-income products provides a necessary buffer. He advocates for a balanced portfolio that combines equities, bonds, and gold to serve as a defense mechanism against the unpredictable nature of market cycles.
Avoiding Performance Chasing
Chasing past performance remains a major trap for many retail participants. Parekh highlights that recent high returns are often backward-looking and reflect the benefits enjoyed by those who invested earlier, rather than a guarantee for new entrants. Instead of succumbing to the noise of thematic trends or following stock tips, he advises a focus on business fundamentals, such as return on equity and consistent cash flow. Reliance on external trends without a fundamental understanding increases the risk of permanent capital loss.
True investment maturity requires an honest assessment of downside risk rather than a fixation on potential earnings. Parekh notes that significant, painful market corrections are a natural part of long-term investing. By treating early-phase market volatility as a regular occurrence, disciplined investors can avoid being caught off guard by corrections. It is important to note that DSP Mutual Fund is a privately held asset management company and is not listed on the stock exchanges. The company continues to expand its offerings, including the recent listing of the DSP BSE Insurance ETF on the BSE on October 7, 2026. Investors in the mutual fund industry should track long-term performance trends and maintain disciplined asset allocation to navigate periods of market stagnation.