Mutual Fund Crash Coming? Best SIP Plans and Mutual Funds for 2025 The stock market is once again facing a downturn. If I talk about my personal losses, I’ve lost over ₹75,000 in just two days. But I am not worried at all. Why? Because, as I’ve explained in my earlier videos, the key is not to fear but to understand. In the stock market, only those who stay calm and hold their positions can make money in the long run.
Mutual Fund Crash Coming ?
Table of Contents
Let’s break down what’s happening, why the market is falling, and what steps you should take to protect or grow your investments.
Why Is the Market Falling?
There are several reasons behind the recent market crash. Let’s look at them one by one.
1. Donald Trump’s Trade Threats
Former U.S. President Donald Trump recently announced that countries in the BRICS alliance—Brazil, Russia, India, China, and South Africa—will face tariffs if they trade in currencies other than the U.S. dollar. This has sent shockwaves across global markets.
Interestingly, while markets in the U.S., Brazil, Canada, and Germany are performing well, India’s market has taken a significant hit. Why? One reason is overvaluation. India’s market is considered expensive compared to most other countries, as indicated by the Price-to-Earnings (P/E) ratio.
For example:
- U.S. P/E Ratio: 27.6
- India P/E Ratio: 24
- Other countries: Lower than India
The higher the P/E ratio, the more expensive the market is. This means India’s market is highly sensitive to external shocks like Trump’s announcements.
2. Overvaluation of Indian Stocks
Indian markets are currently overvalued. This means that stock prices are higher than their actual worth. To understand this better, let’s talk about the Nifty 50 P/E indicator.
The P/E indicator categorizes the market into four zones:
- Green: Market is undervalued and a good time to buy.
- Yellow: Fair value—neither expensive nor cheap.
- Orange: Expensive and risky.
- Red: Overvalued and very risky.
As of now, the Nifty 50 P/E ratio is around 21.07, indicating the market is moving from the orange to red zone. This makes it vulnerable to corrections, which is why further dips of 5–7% can still happen.
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3. Foreign Institutional Investors (FII) Selling
Foreign Institutional Investors (FIIs) are pulling out money from Indian markets at an alarming rate. For example:
- On January 21, FIIs sold shares worth ₹6,000 crore.
- By the end of January, this figure had risen to ₹65,000 crore.
Why are they selling? The falling value of the Indian rupee against the U.S. dollar is a major reason. Imagine investing ₹1 lakh in U.S. markets and then losing ₹10,000 just due to currency depreciation. This is what FIIs are experiencing in India. As the rupee weakens, their returns shrink, making Indian markets less attractive.
4. Weak Corporate Results
Many Indian companies have failed to meet expectations this quarter. Lower-than-expected earnings have further dampened investor confidence. For instance:
- Some companies posted negative growth.
- Overvaluation worsened the impact.
These disappointing results are adding fuel to the fire, leading to more selling pressure.
5. Economic Uncertainty and Budget Concerns
India’s economy is facing multiple challenges. Additionally, the government’s recent moves, like increasing capital gains tax, have discouraged investors.
Last year, the capital gains tax was increased from 10% to 12.5%. Initially, retail investors ignored this, thinking a 2.5% hike wouldn’t matter. However, the reality has been harsh. With negative returns due to market corrections, even long-term investors are facing losses.
The upcoming budget needs to focus on both the economy and the stock market. Policies that boost revenue for companies while putting extra money into the hands of common people are the need of the hour. Only then can we expect sustainable growth.
What Should You Do?
Now that we’ve discussed why the market is falling, let’s talk about what you should do to navigate these challenging times.
1. Don’t Panic
The first and most important thing is to stay calm. The stock market rewards patience. Temporary corrections are a natural part of the cycle. Historically, markets bounce back stronger after a fall.
2. Focus on Long-Term Investments
Short-term fluctuations shouldn’t derail your long-term goals. Continue your SIPs (Systematic Investment Plans). Stopping them during corrections can hurt your portfolio in the long run. Remember, SIPs allow you to buy more units when prices are low, which increases your returns over time.
3. Diversify Your Portfolio
Diversification is key to managing risk. If your portfolio is heavily concentrated in one sector, consider reallocating to include other sectors or asset classes like:
This reduces the impact of a single market crash.
4. Look for Undervalued Opportunities
Corrections often present opportunities to buy quality stocks or funds at a discount. Focus on companies with:
- Strong fundamentals
- Low debt
- Consistent earnings growth
In mutual funds, consider investing in:
- Large Cap Funds: Stable and less risky.
- Small Cap Funds: High growth potential but riskier—ideal for long-term investors.
Best SIP Plans and Mutual Funds for 2025
Based on current market conditions, here are some recommendations for SIPs and mutual funds:
1. Large Cap Funds
- Axis Bluechip Fund
- ICICI Prudential Bluechip Fund
- Mirae Asset Large Cap Fund
These funds focus on well-established companies and offer stability during volatile times.
2. Small Cap Funds
- Nippon India Small Cap Fund
- SBI Small Cap Fund
- Kotak Small Cap Fund
Small-cap funds have the potential to deliver higher returns but come with higher risks.
3. Balanced Funds
- HDFC Hybrid Equity Fund
- ICICI Prudential Balanced Advantage Fund
These funds balance risk and reward by investing in both equity and debt instruments.
4. International Funds
- Motilal Oswal Nasdaq 100 ETF
- Franklin India Feeder – U.S. Opportunities Fund
Investing in international markets can hedge against the falling rupee and provide exposure to global growth stories.
Final Thoughts
Market corrections are tough, but they also teach us valuable lessons. The key is to remain patient, stay informed, and make decisions based on data, not emotions. Always focus on your long-term goals and avoid knee-jerk reactions.
As Warren Buffett famously said, “Be fearful when others are greedy, and greedy when others are fearful.” This is the time to stay calm, analyze opportunities, and plan your next move wisely.
If you have any doubts or need further guidance, feel free to drop a comment. Let’s navigate these turbulent times together. Don’t forget to like, share, and subscribe for more such updates!