Most equity mutual funds offer double-digit returns in one year. What should be your strategy?

Don’t expect high returns from equity funds this year.
Temper your expectations from equity mutual funds.
Equity returns likely to be muted
You would have heard such advice from investment experts in the last one year. Sometimes even more. However, if you take a look at the performance chart, you will be pleasantly surprised that your equity funds offered double-digit returns in one year. (See table)

Only international funds, pharma funds, and IT or technology funds offered single-digit returns in one year. The rest of the categories offered double-digit returns in one year.

Rising interest rates, runaway inflation, recession fears… market pundits had many reasons to be extremely cautious for sometime. No wonder that they have been asking investors to tone down their expectations from equity investments. However, both Indian and international markets have surprised investors in the last year.

Indian investors were not bothered about the pessimistic predictions because the inflationary scenario wasn’t that scary in the country. The Reserve Bank of India successfully tamed inflation without hurting the growth prospects of the economy. Sure, the economy and the stock market faced temporary setbacks because of the overall global economic scenario. However, there was never doubt about the long term prospects of the country. Now with the Indian economy poised to grow at a faster pace, the scenario looks even better.

Globally, things are not that robust. The central banks are still not sure whether they have succeeded in reining in inflation. They are still debating whether they can pause or whether more rate hikes are needed to tackle the stubborn inflation. Though the market seemed out of trouble sometime ago, it started looking under pressure in the recent past. In short, we are still not riding smoothly.
So, what does it mean for your equity investments? As said above, the long term prospects are still promising. So you should continue with your investments without failing to create wealth over a long period. If you have surplus funds to invest for a long period, you may consider making lumpsum investments. The valuations are attractive in the mid and small cap segments, say investment experts.