Behaviour of Multi-Asset Funds in Turbulent Markets
The Shock Absorbers: How Multi-Asset Funds Handle Market Storms
If an Equity Fund is a high-speed sports car, a Multi-Asset Allocation Fund is a heavy-duty SUV. When the road is smooth (a Bull Market), the sports car is faster. But when the road gets rocky and full of potholes (Market Turbulence), the SUV keeps moving comfortably while the sports car might get stuck or damaged.
In 2025, the Indian market saw several potholes from sharp mid-cap corrections to global interest rate shifts. While many pure equity investors saw their portfolios turn red, multi-asset investors stayed remarkably steady.
The 2025 Case Study: A Tale of Two Portfolios
The year 2025 was a perfect laboratory for testing multi-asset funds. While the Nifty 50 moved sideways, specific sectors faced massive drops.
The March-April 2024-25 Correction
During this period, mid-cap and small-cap stocks in India saw a sharp flash correction, with some dropping 30–40% from their peaks.
- Pure Equity Fund Behavior: A typical Mid-cap fund might have lost 15% of its value in just 30 days. Investors who checked their apps felt a sinking feeling.
- Multi-Asset Fund Behavior: During the same 30 days, Gold and Silver prices rallied by nearly 20% due to global tensions. Because a Multi-Asset fund (like Motilal Oswal's) holds a mandatory 10–25% in commodities, the profit from gold canceled out the losses from stocks.
The Result: Most Multi-Asset funds ended the year with 15–18% returns, while many Equity funds struggled to stay above 5%.
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Why they behave differently (The Inverse Effect)
The secret to their stability is that different assets rarely fall at the same time. This is called Negative Correlation.
Automatic Rebalancing: The Silent Advantage
In a turbulent market, your emotions tell you to sell when prices are low. A Multi-Asset fund manager does the exact opposite through Automatic Rebalancing.
If stocks fall, they no longer make up the required percentage of the fund. The manager automatically sells some expensive Gold (which is up) and buys more cheap Stocks. When the market eventually recovers, the fund is already positioned with more units of stocks bought at low prices. You buy low and sell high without even trying.
Taxation in 2025: A Hidden Bonus
In late 2024 and 2025, tax rules for Debt Funds became less attractive. However, many Multi-Asset funds are structured to qualify for Equity Taxation (by using derivatives to keep Gross Equity above 65%).
- This means you get the stability of Debt and Gold but pay only 12.5% Long-Term Capital Gains Tax (on gains above ₹1.25 Lakh). This tax efficiency significantly boosts your take-home returns in volatile years.
Conclusion: Is this the end of worry?
Multi-asset funds didn't just survive 2025; they won it. They proved that you don't need to time the market or guess which sector will be hot next month. By holding a mix of the three pillars Growth (Equity), Stability (Debt), and Safety (Gold) you create a portfolio that can handle almost any global event.
For a beginner a Multi-Asset fund is often the best First SIP because it prevents the panic selling that usually happens during the first market dip.