Navigating market cycles via Multicap approach

Equity markets move through different phases over time, and returns can vary across market segments depending on broader economic conditions and earnings trends. No single segment consistently outperforms through every phase of the cycle.

For investors, the challenge is not identifying cycles in hindsight but positioning portfolios to navigate them ahead of time.

A disciplined multi-cap framework becomes particularly relevant in this context. As part of a diversified portfolio approach, it structurally allocates across different market capitalisations, allowing investors to participate in opportunities across market cycles within a single investment strategy.

As HSBC Multi Cap Fund completes three years since its launch in January 2023, it highlights the importance of allocation discipline alongside tactical positioning. Since inception, the fund has delivered a CAGR of 22.52% as of February 28, 2026. A systematic investment plan (SIP) of Rs 10,000 per month during this period would have grown to approximately Rs 4.56 lakh. While three years is still a relatively short period in equity investing, the experience reinforces the role of diversified exposure supported by research-driven stock selection.

Importantly, the multi-cap structure mandates a minimum allocation of 25% each to large, mid and small-cap stocks. This ensures structural diversification rather than optional exposure that can be altered depending on short-term market sentiment.

Allocation Sets the Foundation

Asset allocation helps create balance, while stock selection ultimately drives outcomes.

The fund focuses on identifying and investing in businesses with sustainable profitability, strong earnings potential and reasonable valuations. It follows a Growth at Reasonable Valuation (GARP) approach to portfolio construction.

The investment process is largely bottom-up, focusing on scalable businesses that are financially sound, led by capable management teams and available at reasonable valuations.

Participating Across Market Phases

Over the past few years, Indian equity markets have seen clear shifts in leadership across market segments. Trying to predict each rotation often leads to reactive investment decisions.

A multi-cap strategy helps reduce this behavioural friction. By design, it keeps investors invested across segments, allowing portfolio performance to emerge through participation rather than prediction.

As of February 2026, the fund manages assets of around Rs 5,300 crore, reflecting growing investor preference for diversified equity exposure through a single investment vehicle.

Reframing an Old Belief

There is a well-known phrase in India — “Teen Tigada, Kaam Bigada” — suggesting that three elements can complicate outcomes. Through a recent investor awareness initiative titled “Teen Tigada, Kaam Tagda”, this idea has been reinterpreted in the context of portfolio construction.

In investing, combining the three market capitalisations — large, mid and small caps — does not dilute performance. Instead, when brought together within a disciplined framework, they can enhance participation across market cycles while improving risk-adjusted potential.

Multi-cap investing is therefore not about chasing the best-performing segment at any given time. It is about building a portfolio that remains structurally aligned with opportunities, supported by research and valuation discipline.

For long-term investors, this balance may matter far more than attempting to predict the next leadership shift in markets.

SIP Performance – Direct Plan

SIP Performance – Direct Plan

Lumpsum Performance

Source: HSBC Mutual Fund. Data as on Feb 28, 2026

Click: https://www.assetmanagement.hsbc.co.in/assets/documents/mutual-funds/en/c7d27da2-209d-40a1-a69f-81ebadd2cb1a/performance-note-equity-hybrid-debt-global-funds-march-2026.pdf to check other funds performance managed by the Fund Manager

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