Market correction has taken a toll on equity portfolios of mutual fund (MF) investors with such funds losing between 11-15 per cent in first half of CY20.

Large-cap funds, which make for the largest equity category, have failed to meet investor expectations with negative returns of over 13 per cent in this period.

MF distributors say that they have seen investors booking losses and exiting their portfolios. “Investors, who are worried over their cash flows in the current environment and were chasing returns, are now looking at pulling out their investments,” said Ritesh Sheth, co-founder at Tejas Consultancy.

So far in this year, large-cap funds have seen deeper value erosion than mid- and small-cap funds. Data from Value Research shows that in year-to-date, mid-cap funds are down 9.6 per cent, while small-cap funds are down 11.26 per cent.

While in recent months there has been some recovery, advisors say investors should tread with caution.

“Within equity, investors should maintain a calibrated approach. Large-cap funds should be kept at 60 per cent of the overall portfolio, with remaining exposure can be towards mid- and small-cap funds. Here too, small-cap exposure should be kept the least,” said Amol Joshi, founder of Plan Rupee Investment Services.

MF experts say that market volatility is likely to continue as economic outlook remains uncertain and Covid-19 is still a major concern.

Market volatility has been on the higher side in the current year. The India Vix, which is a volatility gauge, has seen as much as seven-fold spike in the current calendar year.

Experts say investor should also brace for periods of sharp corrections as corporate earnings are unlikely to improve in near-term.

Analysts say that at least for the next few quarters corporate earnings are likely to remain weak.

“June seems to be a washout quarter on a y-o-y basis. September quarter is likely to be weak as well. In December, we could see flat to slightly positive earnings performance. But if lockdown is tightened again to curb the pandemic, the earnings recovery would also get pushed back,” said Deepak Jasani, head-retail research, HDFC Securities.

Equity schemes have seen heavy redemptions in current year. In year-to-date, redemptions stood at Rs 62,413 crore from such schemes (data available upto May, 2020).

Rising redemptions can also be gauged from the slowdown in the flows coming through systematic investment plans (SIPs).

Since March peak, the SIP book has contracted six per cent. In May, the contribution through SIPs for the MF industry stood at Rs 8,123 crore.