Debt PMS strategy outperforms Nifty50 amid Russia-Ukraine war; 7 small & midcap themes fell over 10% in February

As tremors of the Russia-Ukraine war hit global equity markets including India, Debt focused Portfolio Management schemes (PMSs) outperformed benchmark indices by a wide margin.

Scient Capital’s Aries Mid Yield PMS strategy gave 2.6 per cent return in February compared to 3.1 per cent fall seen in the Nifty50 in the same period, data from PMS Bazaar showed.

Volatility was on the rise in February amid the Russia-Ukraine war which not only fuelled uncertainty it also led to boiling crude oil prices.

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Foreign institutional Investors have pulled out more than Rs 45000 cr from the cash segment of Indian equity markets in February.

The Nifty50 scummed to selling pressure amid weak global cues and many stocks, especially in the small and midcap space fell in double digits.

The S&P BSE Smallcap index was down more than 8 per cent while the Nifty Midcap 100 index fell nearly 7 per cent in February. The S&P BSE 500 index was down more than 4 per cent.

Portfolio management services or PMS cater to high-net-worth investors and the professional fee charged by them is higher than regular mutual funds.

However, it varies from scheme to scheme. As per SEBI norms, a PMS account can be opened and held, with a minimum corpus of Rs 50 lakhs.

As many as 80 per cent or 217 schemes out of 268 which have declared their monthly numbers for February underperformed Nifty50 in February, data from PMS Bazaar showed.

Most of the Small & midcap PMS strategies were under pressure. There are as many as 7 PMS strategies which fell more than 10 per cent in February.

Centrum PMS’s Micro strategy fell 11.6 per cent, followed by Equitree Capital Advisors Emerging Opportunities fund was down 11.3 per cent, Green Portfolio Super 30 scheme was down 11.2 per cent, and Moat Financial Services Aggressive Leaders Fund closed with losses of 11.1 per cent, data from PMS Bazaar showed.

What should investors do?

There is one thing that experts advise investors not to do is ‘panic’. Don’t take a selling decision just because a certain stock that is in your portfolio is falling.

If the company doesn’t have corporate governance issues chances are that a large part of the fall seen in the stock is due to external factors and the fundamentals still remain intact.

“Investors should not sell any quality stocks in panic as they always come back and provide good exits. Similarly, avoid buying non-quality stocks which have been corrected optically,” Naveen Kulkarni, Chief Investment Officer, Axis Securities, said.

“Lastly, invest gradually and use the market corrections. This is not the time to make hurried decisions,” he added.

February turned out to be a month when Debt funds outperformed equity PMS schemes – should one consider increasing the percentage of debt in their portfolio?

Yes, volatility is on the rise and with interest rates likely to head North debt funds could benefit, but experts still advise investors to remain overweight on equities as most quality stocks are available at attractive valuations if you have a long term view.

“With inflation expectations now above 7%, debt instruments should not be considered as long-term investments. Allocating a portion of your liquid cash to short-term debt ETFs would be ideal as the investor can reallocate the capital easily to equities if market valuations seem further attractive,” Divam Sharma, Founder at Green Portfolio, SEBI Registered Portfolio Management Service Provider.

“The goal of every investor is to protect their hard-earned capital above all else. Investments in real estate, commodities, or equities are the only asset classes that enable investors to hedge against inflation and grow their wealth in real terms,” he said.

Sharma further added that allocating a higher percentage to equities with a time frame of 3-5 years would be ideal given where the Indian economy and corporate profit scenario are heading.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)