ICICI Prudential AMC suggests limiting mid-cap and small-cap fund exposure to 30% of a total portfolio to manage market volatility. The fund house recommends a core-satellite strategy with 30-50% in hybrid funds and limiting total holdings to 12-14 schemes. This approach aims to balance growth while highlighting value in sectors like private banking.
ICICI Prudential Asset Management Company has recommended that investors limit their exposure to mid-cap and small-cap stocks to no more than 30 percent of their total investment portfolio. This advice from the fund house aims to help investors navigate market volatility, as smaller company stocks often see sharper price swings compared to larger, established companies. While systematic investment plans remain a useful tool for wealth creation, the asset management company emphasizes that the mix of investments needs regular monitoring as market conditions change.
To build a more stable portfolio, the fund house promotes a core-satellite strategy. In this model, 30 to 50 percent of the capital is anchored in hybrid funds, such as balanced advantage or multi-asset funds. These funds are designed to act as a buffer, helping to soften the impact during periods when the stock market faces a downturn. The remaining portion of the portfolio can then be spread across diversified equity funds and specialized themes, such as gold or international investments, to capture growth opportunities while keeping risk in check.
Another point raised by the asset management team concerns the number of schemes an investor should hold. Many retail investors tend to accumulate a high number of funds across various companies, which often leads to what is known as performance dilution. When a portfolio contains too many schemes, it often begins to mimic the performance of the broad market index, effectively negating the potential benefits of active fund management. Keeping a portfolio limited to 12 to 14 funds is suggested as a sufficient way to gain broad market exposure without making the portfolio too complex or difficult to track.
Regarding specific sectors, the firm notes that recent market corrections have improved the appeal of certain areas. Private banking stocks, for instance, are viewed as more attractive now after a period of sustained pressure from foreign institutional investors. Financial institutions are major components of the Indian economy, and a stabilization in foreign investment flows could lead to a re-rating of these stocks. Beyond the banking sector, the firm also points to potential opportunities in FMCG, energy, and technology, where price adjustments have provided more favorable entry points for long-term investors.
The effectiveness of this strategy relies on an investor's ability to keep their portfolio balanced. The key update for investors to monitor will be their own portfolio composition, particularly the current weight of mid-cap and small-cap schemes, and whether their existing fund count has drifted beyond the suggested range. Reviewing these allocations periodically can help ensure that the portfolio remains aligned with long-term financial goals.